USA Today
WASHINGTON (AP) — Sales of existing homes fell in June for the eighth time in the past 10 months while home prices edged up at the slowest pace in more than a decade — more signs that the housing market has slowed dramatically.
The National Association of Realtors reported Tuesday that sales of previously owned homes and condominiums dropped 1.3% in June to a seasonally adjusted annual rate of 6.62 million units.
The median price of a home sold last month was $231,000. That was up 0.9% from June 2005 and represented the smallest year-over-year price gain since May 1995.
David Lereah, chief economist for the Realtors, said that housing continued to be a “tale of two markets” with previously hot areas experiencing declines and more modestly priced areas showing a boom.
Lereah said that while New York City, Boston, Chicago and Minneapolis had seen sales declines, cities such as Syracuse and Pittsburgh were experiencing rising sales.
By state, Maryland and Virginia were experiencing weakness while Texas, Georgia, North Carolina and Tennessee were enjoying sales increases, Lereah said.
The inventory of unsold homes rose to a record of 3.725 million units, which is a 6.8 months supply at the June sales pace.
Analysts believe that the growing level of unsold homes will further depress prices in coming months.
Lereah said he believes that the decline in housing sales is beginning to level out. Sales of both new and existing homes set records for five consecutive years, but economists believe sales this year will post a decline, reflecting mortgage rates that have risen to the highest levels in more than four years.
The big worry is that sales will fall so sharply that it could send shockwaves through the entire economy, much as the bursting of the stock market bubble in 2000 contributed to the 2001 recession.
Economists expect the decline in the economy to contribute to a slowdown in growth but not result in an outright recession.
Lereah said he believes price weakness will continue as sellers start cutting their asking prices in the face of weaker demand and rising inventories.
Separately, the Conference Board said its consumer confidence index rose to a better-than-expected reading of 106.5 in July from a revised 105.4 in June as consumers shrugged off higher gasoline prices and grew a bit more optimistic about the economy.
Analysts had expected the index to fall slightly to 104.
Consumer confidence has been volatile this year, with the index posting declines both in February and May amid pessimism about the job market. This year’s overall performance is in line with the rebound seen since last November in the aftermath of last year’s Gulf of Mexico hurricanes, however.
The present situation Index, which measures how shoppers feel now about economic conditions, rose to 133.0 from 132.2. The expectations index, which measures consumers’ outlook over the next six months, edged up to 88.8 from 87.5 last month.
“Consumer confidence continues to hold steady, with the prognosis little changed from last month,” said Lynn Franco, director of The Conference Board Consumer Research Center. “Present-day conditions remain favorable, though not as strong as earlier this year. Expectations for the months ahead remain cautious and also below levels earlier this year.”