US existing home sales fall in June, accelerating decline

22 July 2010 18:35  [Source: ICIS news]

WASHINGTON (ICIS news)--US sales of existing homes fell 5.1% in June from May, national real estate market officials said on Thursday, marking an acceleration of the new downturn after a year-long federal housing incentive expired in April.

The National Association of Realtors (NAR) said that sales of existing homes in June were at a seasonally-adjusted annual rate of 5.37m units, down 5.1% from the May figure of 5.66m transactions (also seasonally adjusted and annualised).

Sales of existing homes had fallen by 2.2% in May from April, reflecting the 30 April end of the year-long federal tax credit of $8,000 (€6,240) that had been available to home buyers.

NAR chief economist Lawrence Yun said that the May and June declines were expected.

“Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the tax credit-induced spring surge,” he said.

Yun said he does not expect significant gains in real estate sales until the US employment picture improves.

“Only when jobs are created at a sufficient pace will home sales return to sustainable health levels,” he said.

US unemployment remains stuck at around 9.5%, and Federal Reserve Board Chairman Ben Bernanke told Congress on Wednesday that he does not expect significant reductions in the jobless figures until late next year and into 2012.

The housing market - especially new home construction - is a key downstream consuming sector for the US chemicals industry.  Each new home built is said to account for $16,000 worth of chemicals and derivative products such as plastic pipe, insulation, roofing materials, paints and coatings, adhesives and many others.

While sales of existing homes do not drive chemicals consumption nearly as much as new home construction, those sales do help the new housing market by reducing the overall inventory of residential properties on the market.

Along with the decline in existing home sales last month, the inventory of unsold homes on the market showed a 2.5% increase, the association said.

NAR said that nearly 4m existing homes were available for sale in June, which represents an 8.9-month supply at current sales levels, up from the 8.3-month inventory recorded in May.

In normal economic times, the inventory of existing home for sale would show a four- to six-month supply.

The association noted that while the inventory of unsold homes remains high, it is still below the record of 4.58m residences that were for sale in July 2008.

US new home construction plummeted by nearly 33% in May.

($1 = €0.78)

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