Sales of Existing Homes Fall

Sales of existing U.S. homes dropped more than expected in July, ending a record-breaking run, a trade association report showed Tuesday.

Sales of previously owned homes slipped 2.9% to a seasonally adjusted annual rate of 6.72 million units last month from a downwardly revised 6.92-million-unit pace in June, the National Assn. of Realtors reported.

Analysts had been expecting a drop to 6.81 million units before the report but most saw the drop as insignificant.

“End of the day, it’s just a very strong number. The housing sector doesn’t really show any sign of cooling off very much. This is not even a statistically significant move from June,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, N.C.

Despite the decline, the first since January, the rate of existing home sales was still the third-highest on record.

“To me this is just a blip. I think it’s a more sustainable rate,” said David Lereah, chief economist of the real estate organization.

Despite fewer homes sold, house prices pushed further into uncharted territory. The national median home price hit a record of $191,300, 8.7% more than a year earlier.

Inventories were flat at 2.4 million units, or a 4.3-month supply at the current sales pace.

In California, the amount of time needed to deplete the supply of homes for sale rose to more than three months for the first time in almost a year and a half, helping to hold back the state’s increase in housing prices.

The state’s unsold inventory index in July was 3.3 months, compared with two months in July 2003, the Los Angeles-based California Assn. of Realtors said.

The amount of time needed to deplete the supply of homes for sale has averaged seven months over the past 16 years.

From the beginning of 1992 through the end of 1995, during California’s recession, the supply never dropped below eight months, reaching a high of 17.7 months in February 1993.