US June existing home sales fall 3.8 pct to 5.75 mln annual rate UPDATE

US June existing home sales fall 3.8 pct to 5.75 mln annual rate UPDATE

	Published : Wed, 25 Jul 2007 16:54 By : Agencies Print this Story

(adds data, analysis)

WASHINGTON (Thomson Financial) - Existing home sales in the US fell even faster than expected in June, although median existing home prices rose from the prior year for the first time in nearly a year, according to the National Association of Realtors.

Existing home sales fell 3.8 pct in June to a 5.75 mln unit annual pace, much lower than the expected pace of 5.85 mln units. That puts June existing home sales at the lowest pace since November 2002, when the annual pace was 5.73 mln units.

The Realtors revised May existing home sales to a 5.98 mln unit pace. The group said second quarter existing home sales fell 10.8 pct, in line with its expectation of a 10 pct drop.

June sales fell in all four regions of the country, the group said.

Despite the continuing drop in existing home sales, the median existing home price in June increased 0.3 pct from June 2006 to 230,100 usd. This is the first year-over-year increase in median existing home prices in 11 months.

NAR senior economist Lawrence Yun said this could be a sign the falling inventories are allowing prices to rebound, although he cautioned that the June figures are just a single month's worth of data that should be viewed cautiously.

June inventories of existing home sales fell 4.2 pct from May to an 8.8 month supply. This is the same as the revised May supply of existing homes, which was the highest level since early 1992.

Yun said the overall decrease in existing home sales is likely caused by rising mortgage rates. 'Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales, but fewer risky loans will put the market on a healthier path,' he said.

Economists reacted to the report by saying housing sales are likely to get worse before they get better. Richard Iley of BNP Paribas said worse news is 'certain to follow,' and that a housing recovery is still years away, not months.

Iley added that a 'normal' rate of turnover in the housing market has historically been 4 to 5 pct of the occupied housing stock, and that the turnover rate now is just below 6 pct.

'Given an occupied housing stock of around 110 million units, a return to 'normalcy' implies that existing home sales could easily fall by at least another 1 million units or so,' he said.

Ian Shepardson, chief economist at High Frequency Economics, said housing is a 'bust,' and sales will continue to fall.

'Second quarter sales fell at a 28 pct annualized rate, the fastest decline so far in this crunch, and giving the lie to Mr. Bernanke's bland assertions last week that demand will stabilize and the drag on growth from housing will diminish,' he said. 'Not anytime soon, it won't.'

pete.kasperowicz@thomson.com

pik/wash/slj//cmr

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.