Home Sales Teeter Near 10-Year Low
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Home sales in America probably teetered near a 10-year low, property values dropped and consumer spending cooled, signaling the economy has taken another turn for the worse, reports this week may show.
A total of 5.435 million new and existing homes were purchased in July at an annual pace, according to the median estimate of economists polled by Bloomberg News. June’s 5.39 million rate was the weakest since at least 1999. Spending probably rose 0.3% in July, half the prior month’s gain.
The real-estate recession will persist into next year as stricter lending rules and higher borrowing costs shackle demand. At the same time, equity is disappearing as home prices fall, and wages aren’t keeping up with inflation, depriving Americans of the means to maintain spending, the biggest part of the economy.
“The economy is going down a shaky path,” the chief American economist at New York-based IDEAGlobal Inc., Maxwell Clarke, said.
“We’re not going to see a rebound in housing anytime soon. Consumers are living hand to mouth, and the outlook for spending is very weak,” Mr. Clarke added.
Purchases of new houses dropped 0.9% to an annual rate of 525,000, according to the median estimate of economists polled ahead of a Commerce Department report on August 26. March’s 513,000 pace was the lowest since 1991.
Resales of existing homes, compiled from closings and reflecting contracts signed weeks or months earlier, will be reported by the National Association of Realtors tomorrow. Purchases gained 1% to a 4.91 million annual rate, staying near June’s 10-year low, the survey median showed.
While sales of previously owned homes account for about 85% of the American market, new-home purchases are considered a timelier indicator because they are based on contract signings.
The slump in demand is keeping property values under pressure. The S&P/Case-Shiller index of home prices in 20 metropolitan areas probably fell in June, the survey showed. The figures, due on August 26, would extend a string of declines that began in August 2006.
