Housing sales weak in July

Mortgage rates, slower economy combine to discourage buyers
BY JEANNINE AVERSA
Associated Press

WASHINGTON — House hunters shied away from buying in July, driving down sales of previously owned homes to a 2½-year low. The inventory of unsold homes climbed to a record high.

The figures released Wednesday provided fresh evidence of how much the once-sizzling housing market has cooled.

Prospective home buyers have turned cautious about making such a big-ticket purchase as mortgage rates have gone up and uncertainty has risen over whether the economy and job creation will keep slowing, analysts said.

Existing-home sales dropped 4.1 percent in July from the previous month to a seasonally adjusted annual rate of 6.33 million units, the National Association of Realtors reported. That was the lowest level since January 2004.

The latest snapshot of housing activity was weaker than analysts anticipated; they were forecasting a sales pace of 6.55 million.

Although sale prices for homes no longer are bounding ahead, some prospective buyers are still waiting for better deals, just one more factor in the weak showing, economists said.

"Many potential home buyers have been on the sidelines, some kicking the tires but mostly waiting for sellers to compromise on prices and terms," said David Lereah, the association's chief economist.

The median nationwide price of a home sold last month was $230,000, up just 0.9 percent from the same month last year. The median price is the middle point, where half sell for more and half sell for less.

Meanwhile, the inventory of unsold homes in July rose to a record high of 3.86 million. At the current sales pace, it would take 7.3 months to exhaust that supply. That is the longest period to exhaust the supply of homes since the spring of 1993.

By region, sales tumbled 6.4 percent in the West in July from the previous month. Sales fell 5.9 percent in the Midwest and 5.4 percent in the Northeast. In the South, sales dipped 1.2 percent.

So far this year in the Twin Cities area, existing home sales are down 12 percent from 2004, the record year for sales during the boom.

Monthly sales are down 19 percent from July 2005. The median price of a home sold in the area last month was $235,459, a 0.9 percent increase from the previous July. Last month's inventory of unsold homes climbed 40 percent from July 2005 to a record 31,367 active listings.

The area's supply of homes is similar to the national supply. It would take 7.4 months to sell all of the homes currently for sale in the Twin Cities, according to the Minneapolis Area Association of Realtors. A market is considered balanced between buyers and sellers when there is a four- to five-month supply.

For five years running, home sales had hit record highs as low mortgage rates lured buyers. But the housing sector has lost steam this year as mortgage rates have gone up and would-be buyers have grown cautious.

Against that backdrop, the Federal Reserve this month decided to halt a rate-raising campaign that had pushed interest rates steadily higher over the last two-plus years to fend off inflation.

Staff writer Gita Sitaramiah contributed to this report.

Mpls. Takes Metro Lead In Residential Permits

AP) Minneapolis In what Realtors are calling a trend, more residential units are being built in Minneapolis than in the suburbs.

The Builders Association of the Twin Cities says in July, builders and developers were issued permits to build 193 units in Minneapolis. Next on the list was Shakopee, with 46.

Construction activity in Minneapolis has trumped the suburbs during six of the past 12 months.

Experts say rising suburban land costs and a trend toward urban living mean Minneapolis probably will continue to benefit. Real estate analyst Tom Melchior says people increasingly want to live in the city because of traffic issues and overall quality of life.