U.S. Home Resales Decline for 3rd Month

U.S. home resales declined in August for the third consecutive month, a slowdown that could cause the Federal Reserve Board to refrain from raising interest rates at its next policy meeting in November.

“Signs of inflation are virtually nonexistent,” said Brian Wesbury, chief economist at the investment firm Griffin, Kubik, Stephens & Thompson in Chicago.

Resales fell 0.5% last month to an annual rate of 4.130 million amid higher mortgage rates, according to figures from the National Assn. of Realtors. Analysts had expected a 1.8% decline.

Resales have remained above the 4-million mark since March and hit a record 4.28 million in May. The figure for all of 1995 was 3.8 million.

By region, August home resales rose 5.6% in the West, dropped 9.5% in the Northeast, declined 1.9% in the South and climbed 0.9% in the Midwest.

In California, August sales of new and previously owned homes reached their third-highest level of the last five years. Prices also continued to recover.

A total of 37,503 new and resale homes were sold statewide last month, up 5.6% from July’s 35,529 and up 6.0% from 35,367 for August last year, according to DataQuick Information Services of La Jolla.

“The state’s recovery is moderate but broad-based and steady,” DataQuick Chief Executive Donald L. Cohn said. “There’s an equilibrium to the market we haven’t seen since before the run-up in prices and sales of the late ‘80s.”

The median price paid for a California home--new and pre-owned--was $167,000 in August, up 1.2% from $165,000 a year ago.

The NAR reported that the average price of a pre-owned home nationwide increased 0.2% to $149,900 in August from $149,600 in July.

Home resales are an important gauge of the health of the housing industry, because previously owned homes account for about 85% of all U.S. single-family home sales.

Since May, U.S. resales have softened, declining 2.8% in June and 0.2% in July. But the 4.15-million rate for July was stronger than the initial estimate of 4.14 million.

In August, the average rate on a 30-year fixed loan fell to 8% from 8.25% during July. That put the average payment on a $100,000 loan at $733.76 last month, down from $751.27 for July.

Over the last week, the average rate on a 30-year mortgage declined to 8.14% from 8.28% a week earlier, according to the Federal Home Loan Mortgage Corp.

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Existing--Home Sales

Seasonally adjusted rate, millions of units: Aug. 1996, 4.13

Source: National Assn. of Realtors