April 23, 2008

US existing home sales fall, prices lower

WASHINGTON - SALES of previously owned homes in the United States fell last month, as loan restrictions and the prospect of further price declines kept buyers away.

Purchases dropped 2 per cent, less than forecast, to an annual rate of 4.93 million from 5.03 million in February, the National Association of Realtors said yesterday. The median sales price fell 7.7 per cent from a year earlier.

Defaults on sub-prime mortgage loans have led banks to tighten borrowing rules, while home values are decreasing as foreclosures add to the glut of unsold properties.

The housing slump, now in its third year, is one reason some Federal Reserve policymakers are concerned the US is heading into a recession.

'There still is an imbalance in the existing housing market that needs to be corrected through lower inventories and higher sales,' said Ms Michelle Meyer, an economist at Lehman Brothers in New York, which correctly forecast the sales level.

'The market will remain out of balance this year and most of next. As long as the housing market remains weak, we think the economy will remain weak as well.'

Existing home sales account for about 85 per cent of the US housing market, while new home sales make up the rest. Monthly figures on re-sales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier.

Many economists consider new home purchases, which are recorded when a contract is signed, a more timely barometer of the market.