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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Nadine Carroll who wrote (193892)	7/30/2006 8:52:47 PM
From: geode00	Respond to of 281500

Number of homes on the market up 39% since June 2005. "...In the past week, a government report highlighted that the number of unsold new homes on sale across the country swelled to a record high of 566,000 last month. And on Friday, an International Monetary Fund report said that US property prices were "overvalued", just one of the headaches facing Federal Reserve policymakers. Homeowners have benefited from double-digit annual rises in their property values to go on a credit-fuelled spending splurge. But now the picture is changing. "Many individuals, who signed a (purchase) contract in what they had believed was a booming housing market, may now be backing out of those contracts," said Phillip Neuhart, an economic analyst at Wachovia Securities. "Thus, the new home market is likely weaker than new home sales reflects," he said. Home builders report that sellers are going as far as giving away cars, free kitchen upgrades and holidays to lure reluctant buyers. The Commerce Department on Thursday said sales of new US homes declined three percent in June to a weaker-than-anticipated annualized rate of 1.131 million units. News of the latest sales downturn, and the record number of new homes that are languishing unsold, followed an industry report Wednesday that showed existing home sales fell 1.3 percent in June. On Friday, the government said that US economic growth slowed to just 2.5 percent in the three months to June as consumers turned nervous in the face of sky-high fuel prices and the cooling property market. Economists are divided on whether the Fed will raise interest rates further at its August 8 policy meeting, but agree that 17 straight hikes of its key fed funds rate have squeezed the home market and buyers' enthusiasm. The rate has now gone up to 5.25 percent, adding to the pain for more recent home buyers who took out interest-rate-only mortgages in their rush to get on the property ladder. University of Maryland business professor Peter Morici said that "recession risks remain real and apparent".... news.yahoo.com