Supply of unsold U.S. homes at 23-year high
Resales of U.S. homes fell again in April, while the backlog of unsold properties continued to balloon, an industry group said Friday.
The National Association of Realtors said April sales of existing homes dropped by one per cent to a seasonally adjusted annual rate of 4.89 million units, matching the all-time low set in January. The pace of the decline in sales, however, was slower than in March.
The backlog of 4.55 million unsold properties on the market was the highest level since June 1985. At the current pace of sales, there are 11.2 months of unsold supply on the market.
Slowing sales and rising inventory have combined to push down house prices. The real estate group said the median price for an existing single-family home slipped eight per cent year-over-year to $200,700 US, with further declines projected by economists.
Single-family home sales slipped 0.5 per cent to a seasonally adjusted annual rate of 4.34 million in April from 4.36 million in March.
The problems with the U.S. housing markets stem from issues with the subprime mortgage debacle and the soft U.S. economy. Rising numbers of people unable to pay their mortgage have led to a growing number of foreclosures, which has added to the inventory of properties up for sale.
Further price drops seenBMO Capital Markets economist Sal Guatieri said the slower pace of decline in existing home sales provides some tentative evidence of stabilization in the U.S. housing market.
"But given the supply overhang, the main downside risk to the [Federal Reserve's] economic outlook is 'the possibility that house prices could decline by more than anticipated.' The Fed might refrain from tightening longer than the market thinks," Guatieri said in a commentary.
Other analysts said the turnaround in the U.S. housing market is some time off. "At some point pent-up demand for housing and increasing affordability will turn the tide for housing demand but today’s data on existing home sales show we’re not there yet," said TD Bank economist James Marple.
"Even when home sales begin to pick up, it will take time for inventories of unsold homes to be worked off and prices to stabilize. All told, we expect prices to continue to fall and existing home prices to reach a level between 15 per cent to 20 per cent below their peak in 2006," he said.
In Canada, the number of home resales has fallen slightly from last year's record pace, but remain at historically healthy levels. Prices are still rising in most markets, although the rate of increase has been moderating.
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