Posted on: Tuesday, August 28, 2001

Home resales fall 3 percent in July

By Jeannine Aversa
Associated Press

WASHINGTON — Americans, worried about their jobs, bought fewer previously owned homes in July. But the level of sales remained healthy, suggesting that the housing market will continue to be a pillar of support for the struggling economy.

Existing-home sales fell by 3 percent in July from the previous month to a seasonally adjusted annual rate of 5.17 million, the National Association of Realtors reported yesterday.

Even with the decline, economists said July's sales were solid and noted that existing-home sales have been hovering near record levels in recent months.

"Existing-home sales faded a touch in July, but don't even think that is an indicator that the housing market is finally starting to tank," said economist Joel Naroff of Naroff Economic Advisors. "The level of activity can be unambiguously characterized as very strong."

And with mortgage rates now below 7 percent, the outlook for sales going forward continues to be bright, economists said.

Last week, the government reported that sales of new homes surged by 4.9 percent in July.

In yesterday's report, economists said that the drop in existing-home sales reflected that some prospective buyers were put off by the choppy economy and felt insecure about their jobs in light of mounting layoffs that have been announced over the past several months.

"Psychologically, there's some impact when people are thinking about trading up and buying a house," said David Lereah, the association's chief economist.

Though July's sales pace of 5.17 million marked the lowest level this year, it was 7.3 percent higher than the 4.82 million sales rate in July 2000.

By region, sales fell by 8.9 percent in the West to a rate of 1.33 million in July. In the South, sales declined by 1.9 percent to a rate of 2.07 million, and in the Midwest they edged down by 1.8 percent to a rate of 1.12 million. But in the Northeast, sales rose by 3.2 percent to a rate of 650,000.

The drop in overall sales in July pulled prices down a bit from the previous month.

The median existing-home sales price, meaning half sold for more and half for less, dipped to $150,800 in July from $152,200. But prices were up 5.2 percent from July 2000.

In June, sales of previously owned homes slipped to a rate of 5.33 million, but that matched the fifth highest level on record, registered in December 1998. In May, sales rose to a rate of 5.36 million, the third highest level on record.

In an effort to avert the first recession in the United States in 11 years, the Federal Reserve has slashed interest rates seven times this year, totaling 3 percentage points. The most recent cut, of a quarter-point, came last week.

The biggest reason the housing market has held up well during the economic slowdown is because mortgage rates have been low.

In July, the average rate on a 30-year fixed-rate mortgage was 7.13 percent, down from 7.16 percent in June and well below the 8.15 percent posted in July 2000. Last week, mortgage rates dipped to 6.91 percent.

"This is providing opportunities for first-time buyers who are fundamental to the overall health of the housing market," said Richard Mendenhall, president of the real estate group.