Sales of previously owned homes in the U.S. rose in July from a 10-year low as declining prices helped stabilize demand.
Resales rose 3.1 percent, more than forecast, to an annual rate of 5 million from 4.85 million in June, the National Association of Realtors said today in Washington. The median price dropped 7.1 percent from July 2007, and the number of homes for sale jumped to a record.
Record foreclosures have pushed property values down even more, luring some bargain hunters into the market. Still, tougher lending rules, rising unemployment and a glut of unsold houses signal the outlook for residential real estate remains grim.
"It'll be a while before we get a real recovery in housing," Stephen Gallagher, chief U.S. economist at Societe Generale in New York, said before the report. "These things take time to work through. Prices have come off, so that's helping home sales a little."
Resales were forecast to rise to a 4.91 million annual rate, according to the median estimate of 75 economists in a Bloomberg News survey. Projections ranged from 4.69 million to 5 million. July's sale rate was the highest since February.
Sales were down 13 percent compared with a year earlier. Resales totaled 5.65 million in 2007.
The increase in sales wasn't enough to keep up with the surge in properties coming into the market as foreclosures mount. There were a record 4.67 million unsold houses and condos on the market in July, representing 11.2 month's supply at the current sales pace, matching the highest ever. The group has said a 5 to six month's supply is consistent with a stable market.
The jump in inventory was driven by an increase in the supply of condos as projects started one or 2 years ago came on the market, the Realtors group said.
The median price of an existing home fell to $212,400 from $228,600 in July 2007.
"We are in a very tight credit-availability condition," Lawrence Yun, NAR's chief economist, said in a press conference. "Inventories continue to remain very high."
Resales account for about 85 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
For that reason, economists consider new-home sales, which are recorded when a contract is signed, a more timely barometer of the market. A report tomorrow from the Commerce Department may show new home sales fell in July for the third consecutive month, according to the Bloomberg survey median.
Today's report showed resales of single-family homes increased 3.1 percent to a 4.39 million annual pace. Sales of condos and co-ops climbed 3.4 percent to an 610,000 rate, the most since November.
Purchases increased in three of four regions, led by a 9.7 percent jump in the West. Sales fell 0.5 percent in the South.
Tight credit conditions and ongoing declines in residential construction will weigh on economic growth in coming months, Federal Reserve policy makers said at their Aug. 5 meeting. The Fed's quarterly survey of bank loan officers showed 75 percent had made it tougher for prime borrowers to get a mortgage, more than in the April survey.
"I worry a lot about what's happening in housing," Martin Feldstein, a member of the committee that charts American business cycles, said in an interview on Bloomberg Television last week. "The number of negative-equity homes is exploding. Housing prices will continue to go down, driven by the large oversupply of houses and the increasing number of foreclosures."
The number of unsold previously owned homes has piled up as some owners resist lowering prices and banks repossess more properties.
For their part, builders are working to pare the inventory of new homes. Ground was broken on the fewest new houses in 17 years in July, and permits, a sign of future construction, also fell, a report from the Commerce Department last week showed.
The S&P/Case-Shiller index of home prices in 20 metropolitan areas dropped in May, extending a string of declines that started in August 2006. June figures are due tomorrow.
"Buyers are coming back into the market," Tom McCormick, president of Astoria Homes, said in a Bloomberg Television interview last week. "Remarkably low" prices do "seem to be bringing people in off the sidelines."
While lower home values may be reviving interest among some homebuyers, the declines also reduce household wealth, just as job losses and borrowing costs are rising. That's contributing to a slowdown in consumer spending, the biggest part of the economy.