Demand for Existing Homes Falls for Sixth Time

WASHINGTON — Demand fell a sixth time in a row for existing homes in America during August, with the credit crunch helping sink sales to the lowest pace in five years.Home resales dropped 4.3% to a 5.50 million annual rate, the National Association of Realtors said yesterday. The rate was the lowest since 5.36 million in August 2002.Falling demand pushed the supply of unsold homes higher, an increase expected to exert downward pressure on prices and perhaps cause some would-be buyers to think twice about a purchase.“Overall, horrible — but worse to come thanks to tighter credit conditions,” the chief American economist at High Frequency Economics in Valhalla, N.Y., Ian Shepherdson, said.An NAR economist, Lawrence Yun, said the unusual disruptions in the mortgage market, including a significant climb in jumbo loan rates resulted in a fairly high number of postponed or canceled sales.“The credit market freeze in August no doubt contributed to the sales decline,” he said.Existing-home sales peaked during the summer of 2005 and have since fallen by nearly 25%. “Given the weakness in home prices and the huge inventory of unsold new homes, further declines are coming,” Insight Economics analyst Steven Wood wrote in a note to clients. “Add in the recent turmoil in the mortgage market and these forthcoming declines will be substantially larger than projected just a few months ago. The housing correction is definitely not complete and home construction will continue to shrink until much of the inventory overhang is eliminated.”Inventories of homes rose 0.4% at the end of August to 4.58 million available for sale, which represented a 10.0-month supply at the current sales pace. There was a 9.5-month supply at the end of July. The median home price rose 0.2% to $224,500 in August from $224,000 in August 2006 — but slipped from July 2007’s $228,700.“What the data cannot tell us is how many of those for sale signs represent motivated sellers who will deal at any price (foreclosed properties, speculators who waited far too long to get out, etc.) vs. those homeowners who were just hoping to sell closer to the highs in prices,” the chief economist at RBS Greenwich Capital Markets, Stephen Stanley, wrote. “This mountain of unsold homes will take a while to work off.”NAR’s president, Michigan real estate executive Pat Combs, sees positive signs, however. “The abundant choice of homes is permitting buyers to better negotiate price and terms,” Mr. Combs said. “There are good opportunities in the market now, especially for first-time buyers.”A separate report on American economy yesterday showed consumer confidence fell to a nearly two-year low in September. The Conference Board’s index slid to 99.8 from 105.6 in August, leaving it at its lowest mark since November 2005’s 98.3.“Much of this recent pessimism is due to the turmoil in the financial markets, and in the mortgage market in particular,” Mr. Wood said. “Despite the recent declines, the level of confidence is still well above levels historically associated with severe economic weakness or recessions.”

Demand for Existing Homes Falls for Sixth Time

Demand for Existing Homes Falls for Sixth Time

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