US existing home sales data released yesterday shows the deteriorating housing market is unravelling at an even faster pace than expected, with no signs that a bottom has been reached. The data have left many market experts wondering if the sector is heading for a crash rather than a soft landing. Figures released from the National Association of Realtors show sales of existing homes fell to a seasonally adjusted rate of 6.33 million units in July, down 4.1% from June and 11.2% from July, 2005. The decline was sharper than the 6.55 million unit pace economists had been expecting. Sales of single-family homes fell even harder to a seasonally adjusted rate of 5.51 million units in July, down 5% from June and 11.4% from a year ago. At the same time, housing inventory rose 3.2% to 3.86 million homes for sale at the end of July. This represents a 7.3-month supply of homes, which is up from the 6.8-month supply of homes in June. Fitch Ratings managing director Bob Curran said the pace and depth of deterioration has been faster than he expected. “It kind of looks like it's going to be a harder landing than we'd been expecting,” Curran said. However, he isn't ready to revise his projection for a 9% decline in existing home sales, 12% decrease in new single-family homes, and 10% decline in single-family housing starts in full year 2006. Next week, reports on manufacturing, job growth and the economy's expansion may provide more evidence on where the US is headed. Federal Reserve Bank of Chicago president Michael Moskow said yesterday the central bank, which kept rates unchanged at 5.25% this month after 17 straight increases, may have to lift borrowing costs further.
(Globe and Mail 060824)
I really don't know if anyone is finding this to be a big surprise. A large chunk of the 'bubble' housing market over the past few years has been driven by speculators looking for a quick buck. Eventually anything driven by speculation ends up crashing back to reality. Stock market, anyone? It's interesting though. Collective mindset can alter the future - now that the analysts are publishing their concerns about which way this is headed, do you not think this affects the common man's perspective on it. Everyone will start freaking out because the market analysts said so, not because any clear fundamentals told them so. Very interesting.