Home Sales Are Easing in U.S., but Not Prices
After hitting a record high in August, sales of existing homes nationwide have slowed markedly since the Sept. 11 terrorist attacks and probably will decline about 7% during the fourth quarter, a leading trade group said Tuesday.
But the National Assn. of Realtors said it does not foresee a decline in median home prices, instead projecting that the pace of home appreciation will slow from the current growth rate of 6% to roughly half that by the second quarter.
Overall, the association offered a sanguine outlook for the long term.
“The negative effect should be temporary because the fundamentals of the U.S. economy remain favorable, and we should experience a delayed rebound,” said David Lereah, the Realtor group’s chief economist.
Assuming no further attacks on the U.S. mainland and a mild recession, Lereah said his group was forecasting a rebound in the housing market by spring because of robust new-family formation and exceedingly low interest rates. The conventional fixed-rate mortgage was 6.95% in August, down from 7.13% in July. But Lereah said he expected the rate to fall to about 6.7% in the fourth quarter, matching a record low.
Sung Won Sohn, chief economist at Wells Fargo & Co, agreed with the trade group’s outlook.
“Home sales will soften somewhat, but I don’t think it will decline that much,” he said.
Lereah said California, in particular, should weather the temporary downturn better than other areas because of its diverse economy. Based on reports from brokers throughout the state, Lereah said the housing activity statewide was back to “at least 90%” of where it was before the attacks.
On Tuesday, the California Assn. of Realtors reported sales of existing homes in the state rose 2.3% from a year ago, with the median home price climbing 8.6%.
In August, sales of single-family detached homes in California totaled 571,080 at a seasonally adjusted annualized rate. The median price was $276,590. Both the price and number of sales were record highs.
Nationally, sales of existing homes rose 5% in August to an annual rate of 5.5 million homes. The median price was up about 8% last month to $154,700.
But the national Realtor group said the U.S. economy will contract in the third and fourth quarters of this year. That will push down sales of existing homes in the fourth quarter to 4.9 million on an annualized basis, down from 5.3 million in the third quarter.
The association’s forecast calls for the economy to increase to a 3.4% growth rate by the second quarter. That will once again lift home sales, climbing to 5.17 million units for all of next year.
David Wyss, chief economist at Standard & Poor’s, called the housing forecast a reasonable guess, although he cautioned that there are many uncertainties at the moment.
