US existing home sales fell 2.6% in April

25 May 2007 17:36  [Source: ICIS news]

WASHINGTON (ICIS news)--Sales of existing homes fell by 2.6% in the US in April, the National Association of Realtors said on Friday, citing increased scrutiny and tougher lending criteria by banks.

 

The association said existing home sales last month were at a seasonally adjusted annual rate of just under 6m units, compared with sales of some 6.15m units in March.

 

April’s existing home sales also were nearly 11% below the sales activity seen in April 2006, when 6.71m units changed hands. (All sales figures are in seasonally adjusted annual terms.)

 

The performance of the housing market is of concern to US chemicals manufacturers because existing home sales and new home construction are important downstream consuming sectors for a wide variety of chemicals and chemicals-based products.

 

The downturn in existing home sales suggests that the 18-month slide in the US housing market is not at an end.

 

Association senior economist Lawrence Yun said the April decline in existing home sales was expected in the wake of a collapse in the subprime home mortgage market. 

 

In the US real estate boom years of 2001-2005, many banks gave variable-rate home loans to subprime borrowers, people with bad credit.

 

Since the US housing market went into a decline beginning at the end of 2005, many of those high-risk borrowers have defaulted on their loans, dumping a flood of abandoned homes on the market and triggering closer regulatory scrutiny of and tighter lending practices among mortgage banks.

 

“We’ve been anticipating slower home sales because many subprime loan products are no longer available,” Yun said. However, the availability of conventional mortgages and continuing US economic growth will stabilise the housing market going forward, he said.

 

The association also noted, however, that the national inventory of homes available for sale rose by more than 10% in April to 4.2m units, representing an 8.4 month supply. In March there was a 7.4 month supply of homes on the market.

 

During a more normal housing market period the inventory of homes for sale would be a 6-month supply, according to the association.

By: Joe Kamalick
+1 713 525 2653

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