U.S. home sales drop despite low rates
By Carlos Torres
Bloomberg News Service
WASHINGTON U.S. home resales unexpectedly fell in August to the second-lowest level this year as consumer optimism wanes and the industry slows from a record first half of the year.
"We are winding down from the boom" earlier this year, said David Lereah, chief economist of the association. The current pace "will continue to contribute to the health of a sluggish economy."
The rate of home sales averaged 5.58 million over the first eight months this year. The Realtors association forecasts a record of 5.44 million for all of 2002.
By keeping housing affordable, the lowest mortgage rates in at least 30 years have helped offset declining consumer confidence. Rising home prices have made real estate an attractive investment as the Standard & Poor's Index of 500 stocks fell 28 percent this year.
The median price of a home rose 0.7 percent to $163,600 last month from $162,500 in July, today's report showed. The price is 6.4 percent higher than the same month last year.
The slowdown in home sales suggests that housing won't contribute as much to the economic recovery as it did earlier this year, said Steven Wood, chief economist at FinancialOxygen Inc. in Walnut Creek, Calif.
Housing added 0.6 percentage point to the 5 percent rate of economic growth in the first quarter. In the following three months, it contributed 0.1 percentage point to economic growth of 1.1 percent, government statistics show.
"The trend since the beginning of the year has been lower because ever-lower mortgage rates are having a smaller incremental sales effect," Wood said.