WASHINGTON (AP) — The number of people who bought previously occupied homes plunged in July. The third decline in four months suggests the depressed housing market won’t help the U.S. economy recover this year.
Home sales fell 3.5 percent last month to a seasonally adjusted annual rate of 4.67 million homes, the National Association of Realtors said Thursday. That’s far below the 6 million that economists say must be sold to sustain a healthy housing market.
And this year’s pace is lagging behind last year’s total sales. The 4.91 million last year were the weakest sales figures in 13 years.
Falling home prices have kept many people from selling their houses and taking new jobs in growing areas. They have also made people feel less wealthy and that has reduced the consumer spending that drives about 70 percent of the U.S. economy.
Bigger down payments, tougher lending rules, high debt and a shortage of desirable starter homes have kept many would-be buyers away. Even some with good credit and enough money for a down payment are holding off because they are worried home prices will keep falling.
Since the housing boom went bust in 2006, sales have fallen in four of the past five years. Declining home prices and super-low mortgage rates haven’t been enough to boost sales this year.
The average rate on a 30-year fixed mortgage fell to 4.15 percent this week — the lowest level on records dating back to 1971.
Wealthy buyers are still purchasing homes prices at more than $1 million in the affluent Northeast and growing Midwest. And investors are scooping up dirt-cheap homes in the battered South and West for less than $100,000. Investors are targeting deeply discounted homes in hard-hit areas, such as Phoenix, Las Vegas and Tampa, Fla.
Foreclosures and short sales — when a lender agrees to sell for less than what is owed on a mortgage — make up an increasingly large portion of home sales. A wave of foreclosures is being held up, either by backlogged courts or lenders awaiting state and federal probes into bad foreclosure practices.
Even homes that are under contract are falling apart before the sale is closed. The Realtors’ group has noted that an increasing number of deals have been canceled because appraisals came in below a negotiated price, scuttling home loans in the process.
Re-sold homes are a bargain compared with new homes. The median price of a new home is more than 30 percent higher than the median price for a previously occupied home. That’s twice the normal markup.
Most economists say home prices will keep falling, by at least 5 percent, through the rest of the year. Many forecasts don’t anticipate a rebound in prices until at least 2013.
President Barack Obama echoed those forecasts during a campaign stop Wednesday in Illinois on his Midwestern tour. He said a housing rebound will require “consumers and banks and the private sector working alongside government.”
“It will probably take this year and next year for us to see a slow appreciation again in the housing market,” he said.