The fallout from mortgage woes in the United States continued yesterday 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 announced a $244.2 million (£122 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, the chief executive of Lennar, said: “As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions. We currently expect to be in a loss position in our third quarter.”

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

The surge in sub-prime 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 climbing house prices would allow them to remortgage their property to meet repayments if necessary.

Lennar’s declining fortunes resonated with the industry as a whole, as the Commerce Department reported yesterday that purchases of new homes across the United States 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 information came only 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 bad news on the US housing market has heightened fears that the slump could harm 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, the chief US economist for Lehman Brothers, said: “There is no doubt that the sub-prime problems are extending the housing recession, which would otherwise be over.

“Instead, sub-prime 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.”

Hard to bear

— The near-collapse last week of two Bear Stearns hedge funds with significant exposure to sub-prime mortgages has heightened fears that fallout could be widespread

— Bear Stearns has agreed to inject $3.2 billion (£1.6 billion) into one of the funds, in the biggest hedge fund bailout since Long Term Capital Management collapsed in 1998

— Guy Moszkowski, the Merrill Lynch analyst, said Bear Stearns had not faced a “situation of this magnitude” in two decades as a public company

— The housing slide is hitting consumer confidence. The Conference Board index of sentiment for June fell to a ten-month low. Economists fear rising mortgage costs and falling house prices will restrict consumer spending

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