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Nine-year low for US home sales Nine-year low for US home sales
(10 minutes later)
US home sales declined in January to a nine-year low, while prices also fell and inventories rose, according to the National Association of Realtors.US home sales declined in January to a nine-year low, while prices also fell and inventories rose, according to the National Association of Realtors.
Sales of existing homes dropped 0.4% year-on-year to an annual rate of 4.89 million units last month.Sales of existing homes dropped 0.4% year-on-year to an annual rate of 4.89 million units last month.
The fall was better than predictions of 4.8 million, but showed the continued weakness in the US housing market.The fall was better than predictions of 4.8 million, but showed the continued weakness in the US housing market.
Average house prices fell 4.6% to $201,100 (£106,691) in January compared to the same month one year ago.Average house prices fell 4.6% to $201,100 (£106,691) in January compared to the same month one year ago.
Tighter lending conditions have put people off moving, while the market for sub-prime loans - mortgages given to house buyers on low incomes or with poor credit, has virtually dried up - according to the real estate group.Tighter lending conditions have put people off moving, while the market for sub-prime loans - mortgages given to house buyers on low incomes or with poor credit, has virtually dried up - according to the real estate group.
It is our assessment that it is too soon to talk about stabilisation in existing home sales Bear Stearns analystsIt is our assessment that it is too soon to talk about stabilisation in existing home sales Bear Stearns analysts
This has driven caused a glut of unsold homes, even though housebuilders have cut the price of new homes. This has caused a glut of unsold homes, even though housebuilders have cut the price of new homes.
A sharp increase in interest rates between 2004 and 2006 triggered record mortgage defaults, particularly among sub-prime borrowers, and caused a serious downturn in the US housing market.
It turned out that financial giants had vast amounts of money tied up in investments centred on these risky US home loans, which had been hugely profitable during the boom years, but have now become virtually worthless.
With global banks now taking more risk-averse positions and less willing to lend to each other, businesses or individuals, worries remain that US economic growth may grind to a halt.
On the mend?On the mend?
Lawrence Yun, chief economist for the National Association of Realtors, was fairly upbeat, suggesting the worst of the housing slump may have passed.Lawrence Yun, chief economist for the National Association of Realtors, was fairly upbeat, suggesting the worst of the housing slump may have passed.
He said a rebound could start toward the end of this year as President George Bush's economic stimulus scheme begins to take effect.He said a rebound could start toward the end of this year as President George Bush's economic stimulus scheme begins to take effect.
"As the increased limits for FHA (Federal Housing Administration) and conventional loans are implemented, more buyers will have access to safer FHA loans and lower interest rate loans in high-cost areas, which could lead to steadily higher home sales later in the year," he said."As the increased limits for FHA (Federal Housing Administration) and conventional loans are implemented, more buyers will have access to safer FHA loans and lower interest rate loans in high-cost areas, which could lead to steadily higher home sales later in the year," he said.
But most analysts were more cautious about heralding an end to the housing crisis that is plaguing the wider economy.But most analysts were more cautious about heralding an end to the housing crisis that is plaguing the wider economy.
"We will need at least one months' additional data to assess whether January's home sales data reflect a timing mismatch between the initial agreement to buy and the ultimate closing of the sale," Bear Stearns analysts said in a note."We will need at least one months' additional data to assess whether January's home sales data reflect a timing mismatch between the initial agreement to buy and the ultimate closing of the sale," Bear Stearns analysts said in a note.
"It is our assessment that it is too soon to talk about stabilisation in existing home sales.""It is our assessment that it is too soon to talk about stabilisation in existing home sales."
Scott Brown, chief economist at Raymond James & Associates, said: "The disturbing thing is that we are still looking at a lot of supply on the market and it will take a long time to clear that up."Scott Brown, chief economist at Raymond James & Associates, said: "The disturbing thing is that we are still looking at a lot of supply on the market and it will take a long time to clear that up."
"The implication is that prices will continue to decline," he added."The implication is that prices will continue to decline," he added.