US existing home sales fall 27% in July, slide likely to continue

24 August 2010 17:04  [Source: ICIS news]

WASHINGTON (ICIS)--US sales of existing homes plummeted by more than 27% in July from June, national housing market officials said on Tuesday, falling to their lowest level since 1995 in an accelerating decline that is expected to last through September.

The sharp fall in sales of existing homes last month also meant that the inventory of unsold homes on the US market rose to a 12.5-month supply at the current selling pace, up from the 9-month inventory seen in June.

In normal economic times, the inventory of unsold homes on the market would range between four to six months.

The US housing market - especially new home construction - is a key downstream consuming industry for chemicals, resins and derivative products.

The National Association of Realtors (NAR) said that existing home sales last month fell by 27.2% to a seasonally-adjusted annualised figure of 3.83m units from the downwardly revised pace of 5.26m in June.

Existing home sales had fallen by 2.2% in May from April, but some of May’s sales were closings on contracts initiated during April when a home-buyer tax credit was available.

The post-incentive decline was stronger in June with sales slightly more than 5% down from May, and the crash-dive drop in July represents a much sharper acceleration.

July’s sales pace also was 25.5% below the level of activity reported for July 2009, when existing home sales were at the 5.14m level (also seasonally adjusted and annualised).

The association noted that in the single-family homes category - considered the core of the housing market - sales in July were at the lowest level since May 1995, a period well before the housing boom of 2003-2005.

The sharp fall-off in July was attributed in large part to continuing after-effects of the lapsed federal home-buyer tax incentive that expired at the end of April.

“Consumers rationally jumped into the market before the deadline for the $8,000 [€6,320] home buyer tax credit expired,” said NAR chief economist Lawrence Yun.

“Since May, contract signings have been notably lower and a pause period for home sales is likely to last through September,” Yun said.

However, the continuing nose-dive in real estate sales and housing construction also suggested an underlying weakness in basic demand, Yun indicated.

He pointed out that mortgage loan interest rates were at rock-bottom and home prices at historic lows, a combination that ordinarily should trigger a home-buying frenzy.

But Yun indicated that a housing market recovery is not anticipated until the overall US economy can consistently add jobs.

Despite the gloomy month-to-month figures, Yun said that overall home sales for 2010 should be at or near averages seen over the last several decades.

“Even with sales pausing for a few months, annual sales are expected to reach 5m in 2010 because of healthy activity in the first half of the year,” he said, referring to stimulus-related sales in the January through April period.

“To place this in perspective, annual sales averaged 4.9m in the past 20 years and 4.4m over the past 30 years,” Yun said.

However, the 3.83m sales pace for existing homes in July compares less favourably with the real estate boom years, when month-to-month residential property sales routinely exceeded 7m units on a seasonally adjusted and annualised basis.

($1 = €0.79)

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