U.S. Existing Home Sales Fell 0.3% in May to 5.99 Mln Rate
By Shobhana Chandra
June 25 (Bloomberg) -- Sales of previously owned homes in the U.S. fell in May to the lowest in almost four years, reinforcing concerns about a protracted housing slump.
Purchases last month declined 0.3 percent to an annual rate of 5.99 million, the lowest since June 2003, from a revised 6.01 million in April, the National Association of Realtors said today in Washington. The supply of unsold homes jumped to the highest in almost 15 years.
Weakening demand for existing homes, along with a decline in construction starts on new homes reported last week, make the housing market the biggest threat to economic growth, economists said. An increase in mortgage rates this month will further discourage buyers, leaving a glut of properties on the market.
``I don't think we've seen the bottom yet for existing home sales,'' Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. ``Mortgage rates jumped and are heading higher. Lending standards have tightened not only for the subprime borrowers but also a little bit overall.''
Resales were forecast to fall 0.3 percent to a 5.97 million annual rate from a previously reported 5.99 million in April according to the median forecast of 61 economists in a Bloomberg News survey. Estimates ranged from 5.75 million to 6.15 million.
Existing home sales averaged 6.51 million last year, lower than the 7.07 million average for 2005. Sales last month were down 10.3 percent compared with a year earlier.
Unsold Homes
The supply of homes for sale increased 5 percent to 4.43 million. At the current sales pace, that represented 8.9 months' worth, the highest since June 1992 and up from 8.4 months' worth at the end of the prior month.
The median price of an existing home fell 2.1 percent last month from a year ago to $223,700, the 10th consecutive month of year-over-year declines, the Realtors group said.
Resales of single-family homes fell 0.8 percent to an annual rate of 5.2 million. Sales of condos and co-ops rose 2.6 percent to a 790,000 rate.
Purchases fell 3.4 percent in the South and 0.8 percent in the West. They rose 5.8 percent in the Northeast and 0.7 percent in the Midwest.
Monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier, while new home sales are recorded when a contract is signed. Sales of existing homes account for about 85 percent of the U.S. housing market, and new home sales make up the rest.
New Homes
New home sales, which economists consider a more timely barometer of the market, are set to be released later this week and may show a decline for May after jumping in April by the most in 14 years, according to the median forecast in a Bloomberg survey.
Rising defaults among subprime mortgage borrowers, people with poor or scant credit histories, are hampering a recovery in housing. At the same time, mortgage rates near an 11-month high make borrowing more expensive, even for those with good credit.
The number of Americans who may lose their homes because of late mortgage payments rose to a record in the first quarter, the Mortgage Bankers Association said this month. Subprime loans going into default rose to a five-year high, and prime loans entering foreclosure also surged to a record.
The housing slowdown ``now appears likely to remain a drag on economic growth for somewhat longer than previously expected,'' Fed Chairman Ben S. Bernanke said at a conference in Cape Town, South Africa, this month.
Bernanke's Outlook
Still, Bernanke projects a ``moderate'' pace of growth for the economy given the housing recession isn't spilling over much into other parts of the economy.
``The housing market is likely to find a bottom some time this year and no longer be a drag on top-line growth,'' Fed Bank of Richmond President Jeffrey Lacker said in a speech in Frederick, Maryland, on June 6.
Builders continue to struggle. Rising interest rates and surging delinquencies pushed down confidence among homebuilders this month to the lowest since February 1991, the National Association of Home Builders/Wells Fargo index showed last week.
Hovnanian Enterprises Inc., New Jersey's largest homebuilder, said the spring home-selling season was marred by rising cancellations in April and slow sales that continued into May.
``The nationwide housing market is quite sluggish,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc. in Red Bank, New Jersey, said in an interview June 18. ``It's likely to stay a challenging environment for a little while.''
Builders broke ground on fewer new houses in May, while an increase in building permits pointed to a better outlook for future construction, the Commerce Department reported June 19.
Housing accounts for about 23 percent of the U.S. economy, when taking into account purchases of furniture, appliances and items for new homes, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Last Updated: June 25, 2007 10:01 EDT |
