Sales Of Existing Homes Decline To 10-Year Low

Source : The Business Times, July 25, 2008

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(WASHINGTON) Sales of previously owned US homes fell in June to the lowest level in a decade as tumbling real-estate prices and consumer confidence signal no end in sight to a housing recession now in its third year.

Resales dropped 2.6 per cent to a lower-than-forecast 4.86 million annual rate from a 4.99 million pace the prior month, the National Association of Realtors (NAR) said here yesterday. The median home price dropped 6.1 per cent from June of last year.

The housing slump may deepen further after mortgage rates climbed to the highest in a year this month and turmoil engulfed Fannie Mae and Freddie Mac, which account for more than two-thirds of new home-loan financing.

A record 18.6 million homes stood empty in the last three months as the industry's recession reverberated through communities, separate figures showed yesterday. The NAR report 'is, unfortunately, not telling us about an end' to the slide, said David Resler, chief economist at Nomura Securities International Inc in New York. 'Housing is going to be a non-contributor, if not a drag, on the overall economy.' The Standard & Poor's Supercomposite Homebuilding Index dropped 4.9 per cent to 480.61 at 10.33am in New York. By comparison, the Standard & Poor's 500 Stock Index lost 0.6 per cent, to 1,274.06.

Economists forecast home resales would fall to a 4.94 million pace, according to the median of 77 projections in a Bloomberg News survey. Estimates ranged from a 4.79 million pace to 5.1 million rate.

The Labor Department earlier yesterday reported that first-time claims for unemployment benefits rose last week to the highest in almost four months, a sign the slowing economy is weakening the labour market. Applications increased by 34,000 to 406,000 in the week ended July 19.

Compared with a year earlier, existing home sales were down 16 per cent in June. Purchases are down by about a third from a record of 7.25 million reached in September 2005.

The number of previously owned unsold homes on the market at the end of June rose to 4.49 million from 4.482 million in May. The total represented 11.1 months' supply at the current sales pace. The agents' group has said that a five-to-six month's supply reflects a balanced market.

'The biggest problem is that we've not yet seen inventories come down,' Paul Puryear, managing director of Raymond James & Associates Inc in St Petersburg, Florida, said in an interview with Bloomberg Radio. The housing market isn't likely to recover until at least 2009 or 2010, he said. -- Bloomberg