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Home resales drop
August 27, 2001: 11:12 a.m. ET

July existing home sales fall much more than analysts had expected
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NEW YORK (CNNfn) - Sales of existing homes fell sharply last month, the National Association of Realtors said Monday, declining 3 percent from the previous month and coming in well below analysts' estimates.

Existing home sales fell to an annual rate of 5.17 million from a 5.33 million rate in June. Analysts surveyed by anticipated existing home sales to edge down to 5.30 million.

Markets barely reacted to the news, with the Nasdaq and Dow edging slightly lower in early afternoon trading.

Bonds also were virtually unchanged in trading following the news Monday.

"What this tells you is that we have an economy that's certainly not overextending itself," said Wayne Ayers, chief economist at FleetBoston Financial Corp. "It has some soft spots. It basically shows that overall economic activity is not booming." 

  The good news is mortgage interest rates have been declining and are now close to 6.9 percent. This is providing opportunities for first-time buyers, who are fundamental to the overall health of the housing market.  
  Richard Mendenhall
National Association of Realtors
Though sales ticked lower, the National Association of Realtors (NAR) pointed out that last month's sales were 7.3 percent above a year ago.

The news contrasts with last week's report on new home sales, which blew past analysts' estimates, leading many to speculate that the slowing economy was beginning to stabilize.

Real estate has helped shore up an otherwise sagging economy as consumers continue to buy new and existing homes despite mounds of layoffs, rising energy prices and a volatile stock market.

The Federal Reserve already has lowered interest rates seven times this year in hopes of stimulating the economy, but analysts have said the effects likely won't kick in until early next year.

One thing that has helped keep housing so robust in an economic downturn has been lower mortgage rates that have encouraged first-time home buyers and existing homeowners thinking of trading up or refinancing their existing mortgages.

Though unemployment has been creeping up, it still remains below 5 percent, meaning most Americans have jobs and are able to spend money on a house.

"Clearly when you speak of an economic slowdown, you usually talk of an unemployment rate that is much, much higher. This environment is just not right for a recession," said Anthony Chan, senior managing director at Banc One Investment Advisors Corp.

The NAR cited figures from Freddie Mac that indicated the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 7.13 percent in July, down from 7.16 percent in June.

The NAR said easing sales could be expected in the second half of the year, though they likely will remain above the benchmark 5 million-unit level.

"The good news is mortgage interest rates have been declining and are now close to 6.9 percent," NAR President Richard Mendenhall said. "This is providing opportunities for first-time buyers, who are fundamental to the overall health of the housing market."

The NAR projects 5.18 million in sales for 2001, the second-highest on record.

However, inventory levels fell 5.1 percent at the end of July from the previous month to 2.05 million existing homes available for sale. Fewer homes available contributes to the lower monthly sales figure.

Existing home sales in the Northeast rose 3.2 percent in July at a median price of $153,300, up 6.5 percent from July 2000. Midwest sales fell 1.8 percent with a median price of $134,100, up 4.1 percent from a year earlier.

Sales in the South slipped 1.9 percent at a median cost of $141,600, 6.7 percent higher than a year ago, and western sales fell 8.9 percent with median prices of $190,900, up 4.3 percent. graphic


U.S. new home sales jump, durable goods orders fall in July - Aug. 24, 2001


July existing home sales

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