US Existing Home Sales Up 3.1% In July

Source : The Business Times, August 26, 2008

(NEW YORK) Sales of previously owned homes in the US rose in July from a 10-year low, while the gain wasn't enough to reduce the supply of properties on the market.

Resales rose 3.1 per cent, more than forecast, to an annual rate of 5 million from 4.85 million in June, the National Association of Realtors said yesterday in Washington. The median price dropped 7.1 per cent from July 2007, and the number of homes for sale jumped to a record.

Record foreclosures have pushed property values down even more, luring some bargain hunters into the market. Still, stricter lending rules, rising unemployment and a glut of unsold houses signal the outlook for residential real estate remains grim.

'It'll be a while before we get a real recovery in housing,' Stephen Gallagher, chief US economist at Societe Generale in New York, said before the report. 'These things take time to work through. Prices have come off, so that's helping home sales a little.'

Treasuries, which had rallied earlier in the day, remained higher after the report. Benchmark 10-year notes yielded 3.79 per cent at 10.14 am in New York, from 3.87 per cent at last week's close. The Standard & Poor's Supercomposite Homebuilding Index of stocks was down 1.3 per cent at 285.21.

Resales were forecast to rise to a 4.91 million annual rate, according to the median estimate of 75 economists in a Bloomberg News survey. Projections ranged from 4.69 million to 5 million. July's sale rate was the highest since February.

Sales were down 13 per cent compared with a year earlier. Resales totalled 5.65 million in 2007.

The increase in sales wasn't enough to keep up with the surge in properties coming into the market as foreclosures mount. There were a record 4.67 million unsold houses and condos on the market in July, representing 11.2 month's supply at the current sales pace, matching the highest ever. The group has said a 5 to six month's supply is consistent with a stable market.

The jump in inventory was driven by an increase in the supply of condos as projects started one or two years ago came on the market, the Realtors group said.

The median price of an existing home fell to US$212,400 from US$228,600 in July 2007.

'We are in a very tight credit-availability condition,' Lawrence Yun, NAR's chief economist, said at a press conference. 'Inventories continue to remain very high.' Resales account for about 85 per cent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.

For that reason, economists consider new-home sales, which are recorded when a contract is signed, a more timely barometer of the market. A report today from the Commerce Department may show new home sales fell in July for the third consecutive month, according to the Bloomberg survey median.

Yesterday's report showed resales of single-family homes increased 3.1 per cent to a 4.39 million annual pace. Sales of condos and co-ops climbed 3.4 per cent to an 610,000 rate, the most since November. -- Bloomberg