On what computer operating system is your Premiere Elements 7 running?
What is the Save In location that is designated in the New Project dialog? Is it the default area?
Try deleting the Premiere Elements 7 settings file named Adobe Premiere Elements Prefs, and, if that does not work, then delete the whole 7.0 Folder in which the Adobe Premiere Elements Prefs file exists.
If you let us know your computer operating system, I will post directions for getting to the Adobe Premiere Elements Prefs file and the 7.0 Folder in which it exists.
The answers will be in the details.
Looking forward to your follow up.