Existing Home Sales Skid in June
By Stephanie Armour
A grim report Thursday on sales of existing homes in June signaled that the housing crisis is deepening, with some analysts saying the slump could last into 2010 despite congressional efforts to boost sales and stem foreclosures.
The report helped topple stock prices on Wall Street, with the Dow Jones industrial average sinking 283 points, or 2.4%.
Sales of previously owned homes fell 2.6% from May to June — roughly twice as much as expected — to a seasonally adjusted rate of 4.86 million, the National Association of Realtors reported. That was 15.5% below the level for June 2007.
The median price for June declined to $215,100, down a sharp 6.1% from a year ago. And with an 11-month supply of homes now on the market, prices will remain under pressure.
“Foreclosures and short sales are likely to continue rising, but this is probably the bottom in sales, right about now,” says Mark Zandi, chief economist of Moody’s Economy.com. Still, Zandi says, “It’s reasonable that the market will stay soft until 2010.”
Congress has raised some hopes for a recovery, with final passage nearing of a bill that’s intended to help hundreds of thousands of people avoid foreclosure. But for now, deepening worries about the economy — amid rising mortgage rates, layoffs and inflation — are plaguing real estate and forestalling any recovery.
“I can’t believe it will happen before 2009, and it may take until 2010,” says Dean Baker, co-director of the Center for Economic and Policy Research. “The bailout is not going to matter very much. What matters more is the job market and interest rates. You have a lot of people holding off” on buying or selling.
Lawrence Yun, the NAR’s chief economist, says buyers have been put off by uncertainty about the housing market and the broader economy. “It implies the recovery hasn’t taken place,” he says. “There’s a lack of buyer confidence.”
Tighter lending standards, too, have shut out many buyers. Among the other reasons:
*More layoffs. The number of new applications for jobless benefits exceeded 400,000 last week, a higher number than economists had been projecting.
*Climbing mortgage rates. The average rate on a 30-year fixed-rate mortgage hit 6.63% for the week ended Thursday, its highest in nearly a year.
*Mounting economic anxiety. Higher rates reflect concerns about inflation and the possibility that the Federal Reserve will have to raise short-term interest rates this year.
Rising consumer prices — up 1.1% in June, the fastest rate in 26 years — are also undermining the housing market and boosting mortgage rates. (c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc. <>>