Purchases fall 2.2% to an annual rate of 4.89m; 1st fall in prices in 40 years
(WASHINGTON) Sales of existing homes in the US fell more than forecast in December, capping the biggest yearly slump in more than a generation.
Purchases fell 2.2 per cent to an annual rate of 4.89 million, the National Association of Realtors said yesterday.
For all of last year, sales of single-family homes declined 13 per cent, the most since 1982, and prices dropped for the first time in at least four decades.
Falling property values and tougher borrowing rules may lead to more foreclosures and depress housing for most of this year. The worsening real estate recession is at the core of the economic slowdown and will probably prompt the Federal Reserve to lower interest rates next week and in future meetings, economists said.
‘We are not at the bottom in the housing market,’ said Nigel Gault, director of US research at Global Insight Inc, a Lexington, Massachusetts, forecasting firm. ‘The Fed is trying to battle against the fundamentals which say housing is not going to recover until we have a substantial decline in prices.’
Economists forecast that sales would fall to a 4.95 million annual rate from November’s previously reported five million pace, according to the median estimate of 71 economists in a Bloomberg News survey. Projections ranged from 4.75 million to 5.15 million.
The median sales price fell 6 per cent to US$208,400 from December 2006 and was down 1.4 per cent for all of 2007 from the previous year.
The median price of a single-family home dropped 1.8 per cent in 2007, the first decline since records began four decades ago and probably the first since the Great Depression in the 1930s, the realtors group said.
‘I do expect sales to remain soft through the first quarter and possibly the second quarter,’ said Lawrence Yun, the real estate agents group’s chief economist.
The number of homes for sale at the end of December fell 7.4 per cent to 3.91 million. At the current sales pace, that represented 9.6 months’ supply, compared with 10.1 months in November. The realtors group has said that a five to six months’ supply is needed to stabilise the market.
‘With inventories at such high levels, it’s quite clear that the housing market is going to be in a decline for a long period of time,’ Zach Pandl, an economist at Lehman Brothers Holdings Inc in New York, said before the report.
Elevated inventories leave builders with little incentive to break ground on new projects and push down prices on new and existing homes.
The Commerce Department is scheduled to report new home sales next week. Purchases of new houses, which account about 15 per cent of the market, fell to a 12-year low in November.
Builders broke ground in December on the fewest houses since 1991, making last year’s decline in homebuilding the worst in almost three decades, the department said on Jan 17.
New home sales are considered a leading indicator of the market because they are tabulated when a contract is signed. Sales of existing homes reflect contract closings, which typically come a month or two later.
Resales fell in all four regions let by a 4.6 per cent decline in the north-east.
Sales of single-family homes decreased 2 per cent to a 4.31 million pace, according to yesterday’s report. Sales of condos and co-ops dropped 3.3 per cent to a 580,000 rate.
Source: Bloomberg (Business Times 25 Jan 08)