US home resales lowest in nearly 5 years

Sales by Americans of their homes declined to the lowest level in nearly five years last month amid fresh signs of a two-speed economy as household activity moderated and business expansion picked up.

The National Association of Realtors said sales of existing homes dropped for the fourth straight month in a row with a slide of 3.8 per cent as purchases fell fastest in former bubble markets in the west and south of the country.

Residential construction and household borrowing also continued to decline in recent weeks, according to a Federal Reserve survey of the country's 12 economic regions.

The Fed's Beige Book survey said consumer spending rose at a modest pace overall and was "mixed or below expectations" in some districts.  

The signs of fresh weakness in the US housing market and consumer demand underlined investor worries about household spending and credit quality as global stock markets fell slightly following a turbulent spell.  

Peter Kretzmer, an economist at Bank of America, said: "We are in the second wave of declining home sales. The first wave was the breaking of the upward momentum and flattened out late last year. But now we are seeing the initial stages of a second wave of decline, hastened by lenders becoming more cautious."  

But the declines in household borrowing and construction were partly offset by lending to businesses and commercial building, according to the survey by the Fed's regional banks.  

The survey found "modest" to "moderate" economic growth overall as business investment picked up and export demand increased.   "Several reports indicated that capital spending increased, and expenditures for most business services continued to rise. Employment increased further in most regions and in many sectors of the economy," the report said.  

Accounts from respondents of continued price pressures also make it more likely the Fed will keep interest rates on hold when policymakers meet on August 7.  

Ben Bernanke, Federal Reserve chairman, said last week that the central bank now thinks the economy will not return to close to its trend rate of growth until some time into next year. Earlier on, policymakers had talked about a return to close to trend by the final quarters of this year.

Real Estate News

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