U.S. Economy: Aug. Home Resales Unexpectedly Decline
By Carlos Torres - 09/25 15:26
Washington, Sept. 25
(Bloomberg) -- U.S. home
resales unexpectedly fell in
August to the
second-lowest level this
year as consumer optimism
wanes and the industry
slows from a record first half
of the year.
Sales decreased 1.7
percent last month to an annual pace of 5.28 million units, the National Association of Realtors
said. In January, the industry sold homes at a record rate of 6.05 million, and since then the pace
has slowed in five out of seven months.
``We are winding down from the boom'' earlier this year, said David Lereah, chief economist of the
association. The current pace ``will continue to contribute to the health of a sluggish economy.''
The rate of home sales averaged 5.58 million over the first eight months this year. The Realtors
group forecasts a record of 5.44 million for all of 2002.
By keeping housing affordable, the lowest mortgage rates in at least 30 years have helped offset
declining consumer confidence. Rising home prices have made real estate an attractive investment
as the Standard & Poor's Index of 500 stocks fell 28 percent this year.
The median price of a home rose 0.7 percent to $163,600 last month from $162,500 in July,
today's report showed. The price is 6.4 percent higher than the same month last year.
The slowdown in home sales suggests that housing won't contribute as much to the economic
recovery as it did earlier this year, said Steven Wood, chief economist at FinancialOxygen Inc. in
Walnut Creek, California. Housing added 0.6 percentage point to the 5 percent rate of economic
growth in the first quarter. In the following three months, it contributed 0.1 percentage point to
economic growth of 1.1 percent, government statistics show.
`Smaller Effect'
``The trend since the beginning of the year has been lower because ever-lower mortgage rates are
having a smaller incremental sales effect,'' Wood said.
Yesterday, Federal Reserve policy makers held interest rates at a 41-year low, citing weakness in
manufacturing and hiring and ``heightened geopolitical risks'' that threaten the recovery. Two
members of the Fed's Open Market Committee dissented, arguing for a rate cut.
Economists surveyed by Bloomberg News had expected home resales in August to rise 1.3 percent
to an annual pace of 5.4 million units from July's originally reported 5.33 million rate, based on the
median of 53 forecasts. Existing home sales account for 85 percent of all sales.
The Dow Jones Industrial Average rebounded from its lowest level in almost four years. The Dow
rose 192 points, or 2.5 percent, and the Nasdaq Composite Index rose 45 points, or 3.8 percent, at
3:25 p.m. New York time. The yield on the U.S. Treasury's 4 3/8 percent note that matures in August
2012 rose 11 basis points to 3.75 percent. A basis point is 0.01 percentage point.
Regional Sales
Home resales fell in the Northeast, Midwest and South and rose in the West.
The supply of homes available for sale rose to 5 months' worth in August from 4.7 months' worth the
previous month.
Consumer confidence fell this month to the lowest level since November amid concern over a lack
of jobs and the prospect of a U.S.-led war with Iraq, according to a report yesterday by the
Conference Board, a New York-based research group. The percentage of consumers planning to buy
a home in the next six months fell to 3.3 percent, also the lowest since November.
Falling confidence is undermining the effects of the lowest mortgage interest rates in at least thirty
years. The rate on a 30- year fixed mortgage fell to a record-low 6.05 percent for the week ended
Friday, according to Freddie Mac, the No. 2 buyer of U.S. mortgages.
Mortgage applications to buy homes are still close to a record. An index measuring purchase
applications rose to the third- highest level ever in the first week of September, according to the
Mortgage Bankers Association of America.
Previously owned home sales are counted when a purchase closes, usually more than a month after
a contract is signed. So a rise in applications during September may result in strong resales over the
next few months, analysts said. |
