What should the re investors make of this news? Is this an oportunity or time to worry?
Sales of existing homes in the US slumped a sharper-than-expected 4.1 per cent in July, the National Association of Realtors reported on Wednesday.
The data underlined the rapid pace of the slowdown in the property market and sent stocks lower amid fears over the health of the broader economy.
The number of homes sold fell to an annualised 6.33m, a drop of 4.1 per cent from June against analyst expectations of a 1 per cent decline. The supply of unsold homes rose to a record high 7.3 months of sales, up from about four months early last year.
“No region was spared from July’s softness,” said Omair Sharif, analyst at RBS Greenwich Capital. “The headline figure was well below our forecast and that of the consensus, and corroborates recent builders’ statements that the housing market cooled substantially at the start of the summer.”
The fourth consecutive monthly decline in existing home sales leaves the measure 14 per cent below its peak last June and at the lowest level since January 2004. The median sale price was less than 1 per cent higher than a year before.
US stocks fell on the news, which has potential implications for the spending power of consumers and the economy as a whole. But the Treasury market appeared to shrug off the worse-than-expected report in light summer trading, with yields briefly trading lower but ending the day slightly higher as traders took profits.
The housing slowdown is one of the factors that led the Federal Reserve’s Open Market Committee to hold interest rates steady at its meeting earlier this month. The focus is now on the Fed’s next move.
“A continued softening in the housing data – expected to sap consumer demand – should help the Fed refrain from a rate hike during the next FOMC meeting on September 20,” said economists at ING Financial Markets.
Other recent data have helped paint a gloomy picture of the US housing market. Builders’ are at their least confident in 15 years, and buyers’ confidence is also plumbing fresh lows. New home sales data are due to be released on Thursday, and are also expected to show a decline.
Fears that the housing slowdown is affecting other sectors were compounded last week when a University of Michigan survey found overall consumer confidence at its lowest since the aftermath of hurricane Katrina last year.