US existing home sales fall 5.4% in June as inventories tighten

19 July 2012 16:45  [Source: ICIS news]

WASHINGTON (ICIS)--US sales of existing homes fell by 5.4% in June from May, the third month of declining sales in the last five months, but the National Association of Realtors (NAR) said on Thursday that June’s fall-off was due to limited inventories.

In its monthly report, the NAR said that total sales of existing homes, including single-family residences, town homes and condominiums, were at a seasonally adjusted annual rate of 4.37m units in June, down 5.4% from May’s upwardly revised figure of 4.62m.

But NAR chief economist Lawrence Yun said the June decline in sales was not because of falling demand but rather could be attributed to limited availability of affordable existing homes for first-time, entry-level buyers.

“Despite the frictions related to obtaining mortgages, buyer interest remains solid,” Yun said. “But inventory continues to shrink and that is limiting buying opportunities.”

“This in turn is pushing up home prices in many markets,” he added, noting too that last month there were fewer foreclosed homes available for sale in the housing market.

Citing record-low home mortgage interest rates and still low housing prices, NAR president Moe Veissi said that “The very favourable market conditions are helping to unleash a pent-up demand, which is why housing supplies have tightened and are supporting growth in home prices”.

Yun also pointed out that while June’s existing homes sales figures were down month-on-month, they were still 4.5% higher than in June last year.

He said that housing inventory at the end of June was down 3.2% from May at 2.39m units available for sale, a 6.6-month supply at current sales activity.

That inventory level is more than 24% below June last year when there was a 9-month supply of homes on the market.

The more or less positive elements of June’s sales figures – down but because of a newly tight market – reflect other recent mixed signals for the crucial US housing sector.

US new home construction shot up in June, and home builders report being more confident about their near-term prospects.  But home foreclosures rose sharply in May amid signs that a new wave of repossessed and heavily discounted residential properties could soon flood the market as banks prepare them for sale.

The housing market is a key downstream consuming sector for a wide variety of chemicals, resins and derivative products. 

While new home construction is the principal consuming engine for chemicals in the housing sector, sales of existing homes are important because they take older residences off the market and help generate demand for new construction.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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