US home resales lowest in nearly 5 years
US home resales lowest in nearly 5 years
By Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: July 25 2007 16:12 | Last updated: July 25 2007 16:12
Resales of homes fell to their lowest level in nearly five years last month, as the decline in the US housing market continued. But the median price of existing homes rose for the first times in 11 months and inventories dropped, in a glimmer of hope for the troubled sector.
Existing homes sales fell 3.8 per cent to a 5.75m annual rate, the lowest since November 2002, and significantly lower than predictions of a 5.88m pace. The drop in sales was the fourth monthly decline in a row. The rate of sales is now 11.4 per cent below levels a year ago, with the weakness greatest in the west and south of the country.
The housing market is suffering particularly badly after rising defaults on loans to homebuyers with weak credit histories led to a collapse of prices and sales at the bottom end of the price range.
As lenders have tried to come to terms with mounting losses, standards for lending have risen, further putting downward pressure on sales. More recently, sharp rises in mortgage rates have further discouraged home purchases.
“This is just horrible,” said Ian Shepherdson of High Frequency Economics. “Second quarter sales fell at a 28 per cent annualized rate, the fastest decline so far in this crunch, and giving the lie to [Federal Reserve Chairman Ben Bernanke’s] bland assertions last week that demand will stabilise and the drag on growth from housing will diminish. Not anytime soon, it won’t.”
Some economists said a drop in inventories of 4.2 per cent to an 8.8 month supply, and a rise in the median price of 0.3 per cent to $230,100 provided a silver lining to the still gathering clouds in housing.
“The fall in inventories for the first time this year will help very slowly to correct the imbalance in the housing market,” said Michelle Meyer, an economist at Lehman Brothers. “It could even encourage new construction.” Lehman sees the housing recession bottoming in the middle of 2008, an assessment they have had to push back from the end of this year as evidence of worsening conditions in housing has mounted.
Others saw the small positive moves as little more than a blip, possibly caused because low-priced houses are not selling at all, and some sellers are holding off putting their homes up for sale as they wait for the market to bottom out.
“Housing is contracting at an accelerating pace. Inventory is huge and prices are falling - the 0.3 per cent year on year June rise is irrelevant - and housing is bust,” Mr Shepherdson said.
By Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: July 25 2007 16:12 | Last updated: July 25 2007 16:12
Resales of homes fell to their lowest level in nearly five years last month, as the decline in the US housing market continued. But the median price of existing homes rose for the first times in 11 months and inventories dropped, in a glimmer of hope for the troubled sector.
Existing homes sales fell 3.8 per cent to a 5.75m annual rate, the lowest since November 2002, and significantly lower than predictions of a 5.88m pace. The drop in sales was the fourth monthly decline in a row. The rate of sales is now 11.4 per cent below levels a year ago, with the weakness greatest in the west and south of the country.
The housing market is suffering particularly badly after rising defaults on loans to homebuyers with weak credit histories led to a collapse of prices and sales at the bottom end of the price range.
As lenders have tried to come to terms with mounting losses, standards for lending have risen, further putting downward pressure on sales. More recently, sharp rises in mortgage rates have further discouraged home purchases.
“This is just horrible,” said Ian Shepherdson of High Frequency Economics. “Second quarter sales fell at a 28 per cent annualized rate, the fastest decline so far in this crunch, and giving the lie to [Federal Reserve Chairman Ben Bernanke’s] bland assertions last week that demand will stabilise and the drag on growth from housing will diminish. Not anytime soon, it won’t.”
Some economists said a drop in inventories of 4.2 per cent to an 8.8 month supply, and a rise in the median price of 0.3 per cent to $230,100 provided a silver lining to the still gathering clouds in housing.
“The fall in inventories for the first time this year will help very slowly to correct the imbalance in the housing market,” said Michelle Meyer, an economist at Lehman Brothers. “It could even encourage new construction.” Lehman sees the housing recession bottoming in the middle of 2008, an assessment they have had to push back from the end of this year as evidence of worsening conditions in housing has mounted.
Others saw the small positive moves as little more than a blip, possibly caused because low-priced houses are not selling at all, and some sellers are holding off putting their homes up for sale as they wait for the market to bottom out.
“Housing is contracting at an accelerating pace. Inventory is huge and prices are falling - the 0.3 per cent year on year June rise is irrelevant - and housing is bust,” Mr Shepherdson said.
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