Housing slump deepens

Washington – The U.S. housing market weakened further during June, with sales of existing homes taking an unexpectedly steep 3.8% dive, falling to their lowest level in more than four years.

Sales of existing homes, which account for more than 70% of all U.S. housing activity, fell to a seasonally adjusted annual rate of 5.75 million, down from 5.98 million in May, the weakness intensifying after a smaller 0.5% dip in April, the National Association of Realtors (NAR) reported.

Existing home sales now have fallen 13.9% over the past four months alone, from a level of 6.68 million units in February. June sales of existing homes were off an unnerving 18.7% from the relatively recent high of 7.08 million units recorded in 2005 at the zenith of a housing boom which has since burst.

“Home buyers have been getting mixed signals about the housing market, which is causing some of them to hesitate,” said Lawrence Yun, NAR senior economist. He added, “Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales.”

Also hit hard was the highly volatile market for new homes, where sales skidded down a deeper than expected 6.6% in June, weakening further from a 2.2% drop in May, the Commerce Department reported. New home sales fell to a seasonally adjusted level of 834,000, only slightly above a 13-month low of 830,000 units in March. New home sales have now plunged 22.3% over the past 12 months, from a level of 1.07 million units last June.

The one bright spot, but only up to a point, was housing starts, which improved by 2.3% to a seasonal level of 1.47 million units. But wrapping that silver lining was yet another cloud, as the forward-looking indicator of building permits sought by cash-constrained developers fell by 7.5% in June, to a seasonal 1.41 million units. The level of building permits has now fallen 25.2% from a year-ago level of 1.88 million units.

A widely watched gauge of home builder confidence was at its lowest level in July since 1991. The Builder Confidence Index compiled by Wells Fargo Bank and the National Association of Home Builders fell four points to a level of 24.

“The bottom line is that the single-family housing market is still in a correction process following the historic and unsustainable highs of the 2003-2005 period,” said David Seiders, chief economist of the builders’ trade group.

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