From the Times of Northwest Indiana – August 24, 2006
Bucking the trend seen in Northwest Indiana, house hunters across the United States shied away from buying in July, driving down sales of previously owned homes to a 2.5-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.
In Northwest Indiana, sales of new and existing homes jumped by 5 percent from a year ago, to hit 755 in Lake and Porter counties combined, according to information from the Greater Northwest Indiana Association of Realtors.
That could put the region on track for another record year, topping previous high marks set in 2004 and 2005, GNIAR President Nancy Smith said.
“Seven months into it,” Smith said, “we’re still ahead of last year,” when a total 7,942 homes were sold across Northwest Indiana.
Nationally, however, the latest snapshot of housing activity was weaker than analysts anticipated; they were forecasting a sales pace of 6.55 million.
On Wall Street, the housing report rattled investors and pushed stocks lower. The Dow Jones industrials lost 41.94 points to close at 11,297.90.
Although sale prices for homes are no longer 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 overhang. 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.
Wednesday’s report shows that the bloom is off the rose.
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 amid high energy prices and a slowing economy.
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.