The fallout from America’s mortgage woes continued today as the country’s biggest housebuilder reported an unexpected loss and made a gloomy forecast in the face of mounting evidence that the housing crisis will ricochet across the economy.

Lennar reported a dramatic swing in its fortunes, as it unveiled a $244.2 million loss for the second quarter, down from a $324.7 million profit the year before.

The group heaped further disappointment on its investors, revealing that its average house price fell by 7.5 per cent to $298,000 for the period.

Stuart Miller, chief executive of Lennar, said: "As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteroriating, market conditions. We currently expect to be in a loss position in our third quarter."

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House prices have suffered as a jump in defaults among high risk "subprime" borrowers has combined with Federal Reserve interest rate hikes, to push the average rate for a 30-year mortgage up to 6.60 per cent, reducing demand for properties.

The rise in subprime defaults has escalated after lenders extended mortgages to people with increasingly weak credit ratings at the end of 2006 and the beginning of 2007 on the basis that rising house prices would allow them to remortgage their property to meet repayments if necessary.

Lennar’s declining fortunes chimed with the industry as a whole, as the Commerce Department reported today that purchases of new homes across the US fell by 1.6 per cent in May, while their median price fell by 0.9 per cent from the year before, to $236,100.

That data came just a day after the National Association of Realtors revealed that sales of previously owned homes fell to their lowest level in four years and said that the median US house price was on course for its first decline since the Great Depression in the 1930s.

The slew of bad news on the US housing market has heightened fears that the slump could seriously affect the broader economy.

Howard Silverblatt, a senior index analyst at Standard & Poor’s, said: "House prices are at the root of everything. Not only do the borrowers and lenders lose when defaults rise and house prices decline, but interest rates rise - so consumer and corporate spending are hit, corporate profits go down and the economy suffers."

Ethan Harris, chief US economist at Lehman Brothers, added: "There is no doubt that the subprime problems are extending the housing recession, which would otherwise be over."

"Instead, subprime mortgages are changing the real economy. They are making it harder for companies to borrow money to invest and for buyout firms to finance deals. This, in turn, is hitting the stock markets."

The first round of victims in the subprime mortgage collapse were the lenders themselves, as banks such as New Century and ResMae were forced into bankruptcy.

But most of the home loans were packaged into bonds and other investment pools and sold on to Wall Street firms and financial institutions. The near collapse last week of two Bear Stearns hedge funds with significant exposure to subprime mortgages has escalated concerns that the fallout could be significant and widespread.

Bear Stearns has agreed to inject $3.2 billion into one of the funds, in the biggest hedge fund bailout since Long Term Capital Management Collapsed in 1998.

Meanwhile, it emerged today that the Securities and Exchange Commission is investigating whether publicly-traded companies need to write down the value of their subprime mortgage holdings in the wake of rising defaults. Part of the inquiry will centre on how Bear Stearns allowed the value of the hedge funds to fall so quickly.

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