Existing-home sales drop in U.S. showing likely end to boom

Tuesday, November 29th, 2005

Unsold units hit highest levels in 19 years


WASHINGTON — Sales of previously owned homes in the U.S. fell by 2.7 per cent in October as the housing market continues to signal that the boom of the past five years is ringing more hollow these days.

The National Association of Realtors reported yesterday that sales of existing homes and condominiums declined by 2.7 per cent last month to a seasonally adjusted annual rate of 7.09 million units.

The decline in sales pushed the number of unsold homes to 2.87 million, the highest level in more than 19 years. It would take 4.9 months to deplete that inventory level at the current sales pace.

Even with the decline in sales, the median price of an existing home sold last month rose by 16.6 per cent to $218,000 US compared to the median — or midpoint — price in October 2004.

“This signals that the housing sector has likely passed its peak. The boom is winding down to an expansion,” said David Lereah, chief economist for the realtors association.

The weakness in existing- home sales followed an earlier report that construction of new homes and apartments fell by 5.6 per cent in October, the biggest setback in seven months.

Applications for new building permits, a good sign of future activity, fell by 6.7 per cent, the biggest decline in six years.

The 2.7-per-cent drop in sales of existing homes would have been a larger 3.2-per-cent decline without a boost in activity from people relocating after hurricanes Katrina and Rita devastated the Gulf Coast.

Lereah predicted housing activity would cool further in coming months if, as expected, the Federal Reserve keeps pushing interest rates higher to combat rising inflation pressures that have been triggered by a surge in energy prices.

© The Vancouver Province 2005

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