US existing home sales tumble

Sales of previously-owned homes in the US tumbled by 2.6 per cent in June, much more than forecast by economists, spreading more gloom across the damaged US housing industry.

According to the National Association of Realtors, existing home sales dropped from an annual rate of 4.99m units in May to 4.86m units last month – the lowest in a decade and 15.5 per cent below its pace in June 2007.

The measure of the time needed to sell the inventory of unsold homes rose to an 11.1 month supply from a 10.8 month supply in May.

“The list of reasons for the weakness is long,” says Mike Larson, real estate and interest rate analyst at Weiss Research. “Consumer confidence is down; unemployment is up. Mortgages are harder to get now that lenders have found religion, and the broader economy has been decelerating.”

Goldman Sachs economists said the data pointed “towards continued home price declines”.

The problems in the housing market have pushed Congress and the White House to set aside big differences on the government response and move forward with a package of measures to tackle the crisis.

These include $300bn (€190bn, £150bn) in federal guarantees for refinanced mortgages, $4bn for states and local governments to buy foreclosed properties, a new regulatory structure for Fannie Mae and Freddie Mac, and wide powers for the Treasury department to invest in the two state-backed mortgage companies, if necessary.

The House of Representatives approved the bill on Wednesday and the Senate is expected to do the same tomorrow or early next week. The legislation would then move to the White House, which this week said it would be signed into law despite the administration’s opposition to some of its components.

The pace of existing home sales had been expected to drop in June but by about only 1 per cent. It had recorded a 2 per cent gain in May, raising hopes that the housing market might be experiencing the early stages of a recovery, which have since been dashed.

The north-east experienced a 6.6 per cent drop in existing home sales last month, the most severe on a regional basis. In the west, the pace of existing home sales rose 1 per cent.

These indicators signal that while some bargain-hunting is occurring in areas that have been hardest hit by the housing downturn, parts of the country that were less exposed to the crisis are now suffering.