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US existing home sales fall to 8-year low

WASHINGTON – SALES of previously owned United States homes fell last month to the lowest level in at least eight years as loan restrictions and the prospect of further price declines deterred buyers.

Purchases dropped 1.2 per cent, more than forecast, to an annual rate of 4.97 million, the lowest since record keeping began in 1999, from a 5.03 million September pace, the National Association of Realtors said.

Sales were down 20.7 per cent from October last year and the median home price fell by the most on record.

Defaults on US sub-prime mortgages have prompted banks to tighten lending standards, while foreclosures add to a glut of unsold properties that is putting pressure on home prices.

Lower property values raise the risk that consumers will curtail spending, making firms more cautious about investing and compounding a slowdown in economic growth, economists said.

‘Credit conditions seem to be getting tighter again, the economy is likely to slow and falling prices may be causing people to wait before buying,’ Mr David Sloan, a senior economist at 4Cast Inc in New York, said before the figures were released. ‘There is plenty of downside left in this market.’

A government report showed last month’s orders for US durable goods fell more than forecast, signalling that businesses are losing confidence the economic expansion will be sustained.

Home resales were forecast to fall 0.8 per cent to an annual rate of 5 million from a previously reported 5.04 million pace in September, according to the median estimate of 70 economists in a Bloomberg News survey.

The median price dropped 5.1 per cent to US$207,800 (S$299,900), the biggest drop on record, compared with October last year.

The number of homes for sale at the end of the month rose 1.9 per cent to 4.45 million.

At the current sales pace, that represented 10.8 months’ supply, compared with 10.4 months in September.

‘If sales were to continue to decline at this rate, it would be a big concern, but we don’t expect major declines going forward,’ said Mr Lawrence Yun, the chief economist at the real estate agents’ group.

After half an hour of trading, the Dow Jones Industrial Average rose 163.48 points to 13,121.92 as investors snapped up shares in banks which they saw as being oversold.

 

Source: BLOOMBERG NEWS (The Straits Times 29 Nov 07)

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