Sales of existing US homes fell slightly in July to the lowest level in nearly five years as credit tightened amid rising foreclosures, an industry survey showed Monday.
The National Association of Realtors (NAR) said existing-home sales edged down 0.2 percent to an annualized 5.75 million units last month. The Wall Street consensus forecast was for 5.7 million.
It was the fifth straight month of decline in the important existing-home market, which represents most US housing sales.
The report covers the period before the financial crisis linked to the high-risk subprime mortgage sector emerged.
Economists warned that home sales were almost certain to fall more sharply next month, reflecting the credit crunch that roiled global financial markets in August.
With June sales of existing homes upwardly revised to a 5.76 million unit rate, from 5.75 million, the July sales level was the weakest since November 2002. It was nine percent below the 6.32 million units sold in July 2006.
And the July sales decline marked a record 12th consecutive year-on-year drop. The NAR said it was the first time it has seen an unbroken year-long downturn since beginning to track the data in 1968.
"Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months," said Lawrence Yun, NAR senior economist.
"Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize," Yun said.
Inventories of unsold existing homes, which includes both single-family houses and apartments, rose 5.1 percent in July to 4.59 million units, the NAR said.
The glut of unsold existing homes on the market was at its highest level in more than 15 years, when the world's biggest economy was in recession.
At the July sales pace, it would take 9.6 months to deplete the inventory of unsold homes, the industry group said.
The nationwide median price of existing-home sales -- the price at which half the homes are sold for more and half are sold for less -- was 228,900 dollars in July. That was down 0.6 percent from July 2006 when the median was 230,200 dollars, the highest monthly price on record.
Official data on the smaller, new-home sector published Friday by the Commerce Department showed sales rose an unexpected 2.8 percent in July from the prior month, to an annualized 870,000 units.
Economists said home sales will likely continue to decline as the effects of the crisis in the risky subprime mortgage sector, where loans are provided to home buyers with patchy credit, are increasingly felt.
The subprime crisis and rising loan defaults seized up the financial system in August. The credit crunch led lenders to tighten standards, adding pressure on the housing market that has slumped since early 2006.
"Unfortunately, worse news lies ahead," said Nigel Gault, US economist at Global Insight.
"The July data reflects sales that were agreed in May or June, well before the severe tightening in credit standards that occurred in July and August. That will mean more foreclosures (increasing supply) and fewer qualified buyers (reducing demand), adding up to lower home sales and lower prices. It is hard to see a bottom before mid-2008."
Deutsche Bank chief US economist, Joseph LaVorgna, agreed. "The recent credit market dislocations have resulted in tighter lending terms for many types of nonconforming mortgages ... we anticipate further sales declines in the near term."
