Existing home sales fell in July

Decline of 2.6% reported

weakness was unexpected

`We could ... be close to the peak'

Median price rose to $218,000, a 14.1% increase over 2004

August 24, 2005|By NEW YORK TIMES NEWS SERVICE

The nation's long housing boom appears to be losing steam.

Sales of existing homes fell more than expected in July and prices were virtually flat compared with the previous month, the National Association of Realtors reported yesterday.

Perhaps most significant, the price of condominiums, which have recently attracted a growing number of speculators looking to cash in on the boom, fell for the second straight month, while the number of condos on the market rose sharply.

"We could very much be close to the peak at this time," said Lynn Reaser, chief economist at Bank of America's capital markets group.

"There are signs that investors are becoming a little more cautious about the housing market," she added. "Sellers of the higher price homes are not getting their asking prices, and there is a buildup of inventories."

Economists cautioned that house sales remain near record highs and that the slowdown may turn out to be more of a blip than a clear signal that the boom is reaching a peak. The agents' association adjusts its numbers to take into account seasonal variations like summer vacations; the adjustments are only an estimate, however, and the picture will not become clearer until more data is available, analysts said.

Still, the unexpectedly weak report - especially the softening of the condominium market - caught investors off guard and helped push down stock prices early in the day. The market recovered later, but the Dow Jones industrial average lost 50 points to 10,519, and the Standard & Poor's 500 and Nasdaq composite indexes lost 4 points apiece.

The overall number of homes sold last month fell 2.6 percent to an annual rate of 7.16 million; economists had expected existing home sales to reach an annual pace of 7.25 million in July. The median price of condos and co-ops fell 1.1 percent to $219,000.

"It's not just that the sales level was down but look at the difference between single-family and condos," said Ken Mayland, president of ClearView Economics based in Ohio.

Single-family home sales fell 2.3 percent while condo and co-op sales fell 5 percent. Compared with July 2004, overall sales were still up 4.7 percent last month.

The median sales price - the price at which half the homes sold for more and half sold for less - rose only slightly from June but was up 14.1 percent from a year ago, to $218,0000, according to the real estate agents.

"It's still a sellers' market, although I don't know that we are seeing as many multiple offers and huge increase in the list price," said Thomas R. Kunz, president and chief executive of Century 21, the real estate brokerage company.

There were enough condos for sale - about 404,000 units - to keep the market supplied for 5.3 months, up from 329,000 units and 4.1 months in June and 3.5 months in July 2004.

Overall inventories rose 2.6 percent, to 2.75 million homes, in July, a 4.6-month supply of homes. That is the greatest supply since 2003, but still well below historic levels of six months, real estate executives said. The single-family house inventory of 4.5 months was little changed.

To Kunz of Century 21, the slowdown in sales was a welcome development, he said, because the market had reached unsustainable highs in some states like California.

Often the fastest growing region in recent years, the West last month experienced the biggest drop in number of homes sold - 7.5 percent - and prices in the region were flat. That appears to confirm reports from local real estate agents that growth was beginning to slow.

Kunz said sales were coming off a peak in some California markets, but that other areas in the region, like Phoenix and its suburbs, were still going strong. "California just controls such a huge part of the market that it overshadows everybody else," said Kunz, who recently moved to New Jersey from Southern California.

Even in California, local experts say the market remains robust with prices up 16 percent from a year ago. That's down from average increases of 18 percent in 2003 and 24 percent in 2004, but faster than the rest of the nation, said Michael Carney, a professor at Cal Poly University, Pomona and director of the Real Estate Research Center.

"There are lots of people who are trying to find signs of cooling," Carney said. "I don't see it at this time."

The South was the only one of four regions not to register a decline in sales, but prices there fell 1 percent. Sales of existing homes dipped 3.3 percent in the Northeast and median prices edged up slightly. And the Midwest saw a 1.8 percent dip in sales and a 2.3 percent rise in prices.

Mortgage rates rose slightly in July but were still below year-ago levels. According to Freddie Mac, the average 30-year fixed mortgage rate in June was 5.70 percent, up from 5.58 percent in June but less than the 6.06 percent level in July 2004.

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