March 24, 2007

US home resales rise by nearly 4%

WASHINGTON - SALES of existing homes in the United States rose unexpectedly last month by the largest amount in nearly three years.

However, analysts expressed fears that the recovery for the battered housing industry will be slowed by spreading troubles in mortgage lending.

The National Association of Realtors (NAR) reported yesterday that sales of existing homes rose by 3.9 per cent last month, pushed higher by a sharp increase in sales activity in the north-east. It was the biggest rise since a similar one in March 2004.

The median sale price of home last month dropped to US$212,800, down by 1.3 per cent from the same month last year. It marked a record seven straight months that the median home price has fallen compared to the same period a year ago.

Analysts said the price declines were helping to draw buyers back into the market. But they expressed concerns about what the growing problems in the sub-prime lending market will do to the prospects for future sales.

Sub-prime mortgages were offered to people with weak credit histories who could not qualify for standard types of mortgages. Now an increasing number of those mortgages are going into default.

Mr David Lereah, chief economist for the NAR, said he believed that demand for homes could be cut by 150,000 to 200,000 annually over this year and next year because of the lending troubles.