Posted on 08/23/2006 3:04:57 PM PDT by MeneMeneTekelUpharsin
WASHINGTON — 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 new record high, fresh signs that the housing market has lost steam. The National Association of Realtors reported today that sales of existing homes and condominiums dropped by 4.1 percent in July from June to a seasonally adjusted annual rate of 6.33 million. That was the lowest level since January 2004. The latest snapshot of housing activity was weaker than analysts anticipated. Economists were forecasting the pace of sales to 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 just 0.9 percent from the same month last year and marked the smallest year-over-year increase since May 1995. The median price is the middle point, where half sell for more and half sell for less. The inventory of unsold homes in July rose to a record high of 3.86 million. At the current sales pace, it would take 7.3 months to exhaust that overhang. That is the longest period to exhaust the supply of home since the spring of 1993. On Wall Street, the weak housing report dragged stocks down. The Dow Jones were down 8 points in morning trading.
By region, sales dropped by 5.4 percent in the Northeast. They fell by 5.9 percent in the Midwest and 1.2 percent in the South. Sales declined by 6.4 percent in the West. Today's report shows that the bloom is off the rose. For five years running, home sales had hit record highs as low mortgage rates lured buyers. But the housing sector has lost steam this year as mortgage rates have gone up and would-be buyers have grown cautious amid high energy prices and a slowing economy. Against that backdrop, the Federal Reserve earlier this month decided to halt a rate-raising campaign that had pushed interest rates steadily higher over the last two-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 of the things that Federal Reserve Board Chairman Ben 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 overall economy. 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 — as 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 overall economy.
Consumers who watched their homes rise rapidly in value over the last several years felt wealthy and more inclined to spend. They also borrowed against their homes — treating them like ATMs — to support their spending ways. But with home values not going up as much now as the double-digit gains seen in the past several years, consumers have tightened their belts. That has contributed to a slowing in overall economic activity. Recent reports underscore the housing slowdown's impact. Luxury home builder Toll Brothers on Tuesday 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 will 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.
The home prices were bloated to the max anyway....way too high for what they were worth. It's just a house, not the state of Rhode Island.
I could buy my block for that.
Too late.
Good point. Let's see how things pan out here for the next two years or so for a better frame of reference.
Ha ha ha. Some things are bit overpriced, aren't they?
Well, I live in a smaller town and prices always seem to be higher in the cities.
It's off the peak. Still not headed off the cliff. Bears watching, but not high anxiety at this time.
Oh come on. Where's your insanity? We're doomed, get with the program.
-Descartes
My neighboor listed his house at $699K six months ago. It's down to $599K and no interest.
Better watch out, I think exTexan has an exclusive on real estate doom threads around here.
Isn't it funny how everyone has been saying for years "these real estate prices are ridiculously high" and now that they are coming down a little, it's "THE END OF THE WORLD!"
ping
Be flippant if you want but a good portion of the economy is dependent on those high home values. When they fall - so do a lot of other things.
For that much money, I could buy every lot and building on Main Street in this small west Texas town.
These gay illegals that drink Budweiser, like Starbucks coffee, use Microsoft Windows and shop for Chinese made goods, disposable cell phones and Dixie Chicks CDs at Walmart...
They think Paris Hilton's new CD is pretty hot, got a mortgage without a SS number so the housing bubble will burst. These bastards put catsup on hotdogs. They order 'Big Macs' y papas fritas en espanole. ¡Mi hermana come el queso de los alces! toda su base es pertenece a ellos...
They listen to 'error america' but don't understand a word of it!
If they posted this they would end this with a /rant tag but they don't know html because they can't read the 'html guide'.
Pirate "ARRRRR!...
There's a lobster loose! Quickly yourself with hot butter and carry lemons just in case! You have to squirt him and so forth to repel him! Everybody get outta here quickly there's going to be a tragedy!
Illegals and financial idiots, hardest hit.
Do you know what he bought it for and how long ago.
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