U.S. Sales of Previously Owned Homes Decline 3.2%, Adding to Property Glut

[Purveyor]

Source: Bloomberg

Sept. 9 (Bloomberg) -- Fewer Americans than forecast signed contracts to purchase previously owned homes in July, a sign that slowing demand will keep adding to the glut of unsold properties.

The index of pending home resales fell 3.2 percent after a revised 5.8 percent gain in June, the National Association of Realtors said today in Washington. The decline is the fourth this year as tighter credit conditions keep would-be buyers from taking advantage of lower prices.

Thirty-year fixed-rate mortgages averaged 6.29 percent in July, up from an average of 5.81 percent in the first half of the year. The U.S. government's takeover of Fannie Mae and Freddie Mac, which own or guarantee almost half of American home loans, aims to ensure that mortgage funds remain available and to minimize further declines in the housing market.

``Both the pricing and availability of mortgages remain very restrictive and are major impediments to a rebound in sales,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland.

Economists had projected the index would fall 1.5 percent, according to the median of 39 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3.5 percent to a 2 percent gain.

Regional Breakdown

Pending resales were down 6.8 percent from July 2007, today's housing report showed. Resales dropped the most in the West, where they were down 10.6 percent from June. They fell 7.5 percent in the Northeast and were unchanged in the South. Pending sales increased 2.8 percent in the Midwest.

Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=akrDwD1cUXkM&refer=us

[Yavin4]

1. Simply Put, Housing Valuations Are Falling Back in Line with Job and Salary Growth

Since Bush II, this economy has not generated hardly any significant job growth which has created a huge drag on salaries. During this time, housing became disconnected to salaries because of exotic mortgage packages such as sub prime and Alt-A. This was the chief catalyst to the housing bubble.

Now, that the exotic mortgages are no more, mortgage applicants have to prove their income worthiness, which they simply don't have. Thus, housing is now reflecting that.

[MannyGoldstein]

2. House Prices Have Doubled Since 1970

As compared to a median working wage.

In some ways a return to previous relative valuations is welcome - but it will be an ugly ride.