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Home Sales Dip As Prices Rise

Posted on: Wednesday, 24 August 2005, 15:00 CDT

WASHINGTON -- Sales of previously owned homes fell in July as some house hunters were put off by galloping prices, but the pace of sales was still the third-highest ever, suggesting the red-hot market isn't cooling much.

The latest snapshot of activity in the housing market released by the National Association of Realtors on Tuesday showed that July sales of existing homes -- including single-family, town homes and condominiums -- totaled 7.16 million units at a seasonally adjusted annual rate.

That represented a 2.6 percent decline from June's record-high pace of 7.35 million units.

Soaring home prices and, to a lesser extent, rising mortgage rates played a role in July's drop in sales -- making it harder for some house hunters to take the leap into home ownership, analysts said.

"Some people are being turned off by the high house prices, and they just can't pull the trigger," said Joel Naroff, president of Naroff Economic Advisors. "Without question that's causing some people to think twice about buying."

The median sales price of an existing home in July climbed to a record $218,000. That was up a sizable 14.1 percent from a year ago. The median price is where half sell for more and half sell for less.

Looking at individual regions, the median house price in July compared with a year ago went up the fastest in the West, by 16 percent. That was followed by a 13.1 percent jump in the Northeast, an 11.9 percent rise in the Midwest and a 7.5 percent pickup in the South.

NAR President Al Mansell of Salt Lake City said the rate of price growth is a simple reflection of supply and demand.

"Housing inventory levels improved in July, but they're still quite lean by historic standards," Mansell said in a prepared statement. "If the supply of homes rises, it should reduce competition between buyers and take some of the pressure off of prices. Even so, we expect home price appreciation to remain above normal over the next year."

The housing report weighed on some Wall Street investors. The Dow Jones industrials lost 50.31 points to close at 10,519.58.

On the sales front, even with the decline in July, the pace of sales still indicated that housing activity was healthy, analysts said.

"I believe that the housing market has moved from a boil to a simmer," said Richard Yamarone, economist at Argus Research. Some economists predict home sales -- which have clocked record highs four years in a row -- will set another record in 2005.

The overall pace of sales, at 7.16 million units, in July was the third highest ever. The second-best showing came in April with a pace of 7.18 million units.

Economists were predicting that home sales would slow in July, saying the blistering pace of June just couldn't be sustained. Before release of the report, analysts were forecasting sales to drop to a pace of around 7.25 million.

By region, sales were down in all parts of the country, except for the South, where they were flat, holding at a record pace of 2.74 million units.

For the Midwest, sales dipped by 1.8 percent in July from the previous month to an annual rate of 1.61 million units. Sales in the Northeast fell by 3.3 percent to a pace of 1.19 million units. In the West, sales declined by 7.5 percent to a pace of 1.61 million.

Source: Deseret News (Salt Lake City)

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