US home sales fell in April, but turnaround seen

23 May 2008 17:52  [Source: ICIS news]

WASHINGTON (ICIS news)--US sales of existing homes fell 1% in April from March and the glut of unsold homes rose more than 10% to the second-highest level of 4.55m units - but a top housing economist said on Friday that the sector is set to turn around.

 

The National Association of Realtors (NAR) said the 4.55m unsold homes on the market represent an 11.2 months supply of housing at current sales rates, a level of inventory that is “uncomfortable”.

 

During normal economic times, the US housing market would have no more than a 6-month supply of homes for sale.

 

The US housing market, especially new home construction, is a major downstream consuming sector for the chemicals industry. 

 

New home construction is a stronger market for chemicals and derivative products, but that key housing segment will remain sluggish as long as there are so many existing homes for sale, exerting downward pressure on prices and discouraging contractors from building new homes.

 

Because of the high inventory of unsold homes, housing prices continue to fall in most parts of the US, according to NAR chief economist Lawrence Yun.

 

“The national median existing home price in March was $202,300 [€129,472], which is a decline of 8% from one year ago - the second-largest price decline in the NAR data series going back to 1968,” Yun said.

 

Nevertheless, Yun said he is confident that the US housing sector is poised for a recovery.

 

Current sales activity is very low, he concedes, at a level like that in 1998.  However, Yun noted, “compared with ten years ago, we have 25m more people in this country and more than 10m more jobs have been created”.

 

“In short, today’s sales activity is far below what can be expected based on fundamentals,” Yun said, suggesting that there is pent-up consumer demand for housing that soon should revive the housing sector, especially as more mortgage financing becomes available.

 

“One terrific development in the past two weeks has been the improving conditions on mortgage availability,” Yun said, noting that federal banking authorities have eased home loan fees and down payment requirements.

 

“Given these developments, I forecast improving sales conditions in the second half of the year,” Yun said.

 

($1 = €0.64)

 

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By: Joe Kamalick
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