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Drop in resales weigh down housing

By Don Hogsett -- Home Textiles Today, 9/3/2001 12:00:00 AM

WASHINGTON —

After racing ahead to near-record levels through the first six months of the year, the U.S. housing market skipped a beat moving into the back half, turning in a mixed performance — the big resale market stumbling, while starts and new home sales continued to forge ahead.

As widely expected, existing home sales — by far the largest segment of the U.S. housing market — took a breather in July, declining by 3.0 percent to a seasonally adjusted level of 5.17 million from a revised 5.33 million in June, the National Association of Realtors (NAR) reported. The drop was somewhat deeper than expected, with analysts predicting a smaller decline of 1.3 percent.

This may turn out to be good news for suppliers and retailers of home furnishings products — as long as consumers keep buying all those expensive houses, they have no money left to fill them up with sheets and towels and window treatments. Seduced by low mortgage rates, say some analysts, consumers may have bought more house than they can really afford, producing a new generation of house-poor consumers.

And sales of existing homes — which make up roughly 85 percent of all U.S. home sales — are expected to cool off through the balance of this year, which could signal an end to a long drought in home fashions sales. Dr. David Lereah, chief economist for the NAR, said, "Given the huge volume of home sales over the last five years, we're still seeing a very strong demand, but the pressure is starting to ease."

Putting the bite on home buyers, and tying up cash that might otherwise go to dressing up the house, the national median existing-home price was $150,800 in July, up 5.2 percent from year-ago levels, running well ahead of the rate of overall inflation.

Scoring a big jump in July was the highly volatile figure for new home sales, which is historically subject to substantial revision each month. New home sales, which cater mostly to an upscale consumer rather than the entry-level home buyer, climbed by 4.9 percent, to a seasonally adjusted annual pace of 950,000, up from a revised 2.8 percent gain to 906,000 in June, the Commerce Department reported.

"With rates on long-term mortgages hovering just below 7 percent, the market is very brisk right now," said Bruce Smith, president of the National Association of Home Builders. Sales of new homes advanced in every region of the country, scoring the biggest gain in the Northeast, jumping up by 18.0 percent, followed by gains of 6.9 percent in the Midwest, 4.6 percent in the West, and 2.3 percent in the South.

A gauge of future activity in new home sales, housing starts climbed by 2.8 percent in July, to a seasonally adjusted annual rate of 1.67 million from a revised June rate of 1.63 million, the Commerce Department reported. But much of that activity came from apartment house construction, while starts of single-family homes rose at a slower pace of 1.5 percent.

And looking further into the future, the rate of permits issued for new home starts actually declined in July, slipping by 1.8 percent to a seasonally adjusted rate of 1.56 million from a revised June rate of 1.59 million. Permits for new single-family home starts fell at a slightly faster pace, giving up 1.9 percent.

Housing by region
Month-to-month percent change

	Existing home sales	Housing starts	New home sales
Northeast	3.2%	2.1%	18.0%
Midwest	-1.8	-0.7	6.9
South	-1.9	3.8	2.3
West	-0.9	2.3	4.6

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