Realtors report sales drop, mounting home inventory
July figure is lowest since January '04
BY JEANNINE AVERSA
ASSOCIATED PRESS
August 24, 2006
Sales of previously owned homes plunged in July to the lowest level in 2 1/2 years, and the inventory of unsold homes climbed to a record high, fresh signs that the housing market has lost steam.
The National Association of Realtors reported Wednesday that sales of existing homes and condominiums in July dropped 4.1% from June's total to a seasonally adjusted annual rate of 6.33 million. That was the lowest level since January 2004.
By region, sales dropped 5.9% in the Midwest, 5.4% in the Northeast, 1.2% in the South and 6.4% in the West.
The latest snapshot of housing activity was weaker than analysts anticipated. Economists forecast that the pace of sales would fall to 6.55 million.
"The housing sector is fragile," said David Lereah, the association's chief economist.
The median price of a home sold last month was $230,000. That was up 0.9% from the July 2005 and marked the smallest year-over-year increase since May 1995. The median price is the middle point at which half the houses sold for more and half sold for less.
The inventory of unsold homes rose to 3.86 million in July. That figure represents a supply of homes still available for 7.3% of a month.
Wednesday's report shows the bloom is off the rose.
For five years running, home sales hit record highs as low mortgage rates lured buyers. But the housing sector lost steam this year as mortgage rates went up and would-be buyers grew cautious amid high energy prices and a slowing economy.
Against that backdrop, earlier this month the Federal Reserve decided to halt a rate-raising campaign that had pushed interest rates higher over the last 2-plus years to fend off inflation.
The Fed's goal is to raise rates sufficiently to thwart inflation but not enough to hurt the economy.
One thing Federal Reserve Board Chairman Ben S. Bernanke and his colleagues are watching closely is the housing slowdown. If home prices and sales were to crash, that could spell big trouble for the economy overall. Thus far, Bernanke has said the market's slowdown has been fairly orderly and smooth.
Lereah said he still expects a "soft landing" for the once high-flying housing sector. But he urged the Fed to leave interest rates alone and refrain from bumping them up again, an action that some analysts have said is a possibility.
The housing sector's transition from a red-hot market to a cool one has important implications for the economy.
Consumers who watched their home values rise rapidly over the last several years felt wealthy and more inclined to spend. They borrowed against their homes -- treating them like ATMs -- to support their spending ways.
But because now home values aren't going up as much as the double-digit gains we saw in the past, consumers have tightened their belts. That has contributed to a slowing in economic activity.
Recent reports underscore the housing slowdown's impact.
On Tuesday, luxury homebuilder Toll Brothers reported a sharp drop in third-quarter profits. One day earlier Lowe's Cos., the nation's second-largest home-improvement chain, warned that a slowing housing market would hurt its earnings for the rest of the year.
Last week the National Association of Home Builders reported that confidence among builders sank to a 15-year low.
ASSOCIATED PRESS
August 24, 2006
Sales of previously owned homes plunged in July to the lowest level in 2 1/2 years, and the inventory of unsold homes climbed to a record high, fresh signs that the housing market has lost steam.
The National Association of Realtors reported Wednesday that sales of existing homes and condominiums in July dropped 4.1% from June's total to a seasonally adjusted annual rate of 6.33 million. That was the lowest level since January 2004.
By region, sales dropped 5.9% in the Midwest, 5.4% in the Northeast, 1.2% in the South and 6.4% in the West.
The latest snapshot of housing activity was weaker than analysts anticipated. Economists forecast that the pace of sales would fall to 6.55 million.
"The housing sector is fragile," said David Lereah, the association's chief economist.
The median price of a home sold last month was $230,000. That was up 0.9% from the July 2005 and marked the smallest year-over-year increase since May 1995. The median price is the middle point at which half the houses sold for more and half sold for less.
The inventory of unsold homes rose to 3.86 million in July. That figure represents a supply of homes still available for 7.3% of a month.
Wednesday's report shows the bloom is off the rose.
For five years running, home sales hit record highs as low mortgage rates lured buyers. But the housing sector lost steam this year as mortgage rates went up and would-be buyers grew cautious amid high energy prices and a slowing economy.
Against that backdrop, earlier this month the Federal Reserve decided to halt a rate-raising campaign that had pushed interest rates higher over the last 2-plus years to fend off inflation.
The Fed's goal is to raise rates sufficiently to thwart inflation but not enough to hurt the economy.
One thing Federal Reserve Board Chairman Ben S. Bernanke and his colleagues are watching closely is the housing slowdown. If home prices and sales were to crash, that could spell big trouble for the economy overall. Thus far, Bernanke has said the market's slowdown has been fairly orderly and smooth.
Lereah said he still expects a "soft landing" for the once high-flying housing sector. But he urged the Fed to leave interest rates alone and refrain from bumping them up again, an action that some analysts have said is a possibility.
The housing sector's transition from a red-hot market to a cool one has important implications for the economy.
Consumers who watched their home values rise rapidly over the last several years felt wealthy and more inclined to spend. They borrowed against their homes -- treating them like ATMs -- to support their spending ways.
But because now home values aren't going up as much as the double-digit gains we saw in the past, consumers have tightened their belts. That has contributed to a slowing in economic activity.
Recent reports underscore the housing slowdown's impact.
On Tuesday, luxury homebuilder Toll Brothers reported a sharp drop in third-quarter profits. One day earlier Lowe's Cos., the nation's second-largest home-improvement chain, warned that a slowing housing market would hurt its earnings for the rest of the year.
Last week the National Association of Home Builders reported that confidence among builders sank to a 15-year low.
No comments:
Post a Comment