Combined purchases of new and previously owned homes fell to an annual rate of 7.24 million in August, the fewest since June 2003, according to the median forecasts of economists surveyed by Bloom-berg News. Americans spent 0.2 percent more on goods and services last month, the smallest gain since Novem-ber.
Consumers are finding it harder to tap the equity in their homes, a major source of cash in recent years, as the property market cools. A slowdown in their spending, which makes up 70 percent of the economy, may ensure that Federal Reserve policy makers refrain from raising interest rates for the rest of the year. “Housing activity is weakening, consumer spending isn’t going great guns and overall growth is fairly modest,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, a forecasting firm in New York. “It will be steady as she goes” for the Fed.
A report today from the National Association of Re-altors will show sales of previously owned homes fell to an annual pace of 6.2 million in August from 6.33 million in July, economists project. Two days later, the Commerce Department is forecast to re-port new homes sold at a 1.04 million annual rate, down from July’s 1.072 million. KB Home, the sixth-largest U.S. builder, reported last week that revenue in the quarter ended August 31 rose 6 percent from the same period of 2005, the smallest gain in four years. Home sales fell to 7,893 from 8,233 a year earlier.
“We do not expect conditions to improve significantly in the foreseeable future,” Bruce Karatz, KB Home’s chief executive officer, said in a statement. “Until the supply of unsold homes is reduced and affordability improves, there will continue to be pressure on pricing.” The National Association of Realtors’ home-affordability index dropped in July to the lowest level since record keeping began in 1989.
The 102.8 reading was barely above the 100 level at which a family making the median income can afford the median-priced home. Last month, the Commerce De-partment reported that the inventory of unsold new homes rose to a record 568,000 in July.
The Nassau Guardian
