WASHINGTON—The pace of U.S. existing-home sales fell in June to a four-and-a-half-year low and mortgage applications fell last week as grim news continues to shake the housing sector.
Existing-homes sales hit a lower-than-expected 5.75 million unit annual rate while prices and inventories remained flat, the National Association of Realtors said in a report Wednesday.
Applications for new mortgages hit their lowest level since mid-February as the demand for homes continues to slide. The largest U.S. mortgage lender, Countrywide Financial Corp. , said on Tuesday it may be 2009 before the housing market recovers.
Wednesday's data signaled to many analysts that the housing market still has a ways to fall.
"We haven't seen any sign of a bottom in home sales and I think that is discouraging in terms of the economic outlook," said Scott Brown, chief economist for Raymond James & Associates, of St. Petersburg, Florida.
In the past week, the housing slump has emerged as a problem for a widening range of companies. In reporting quarterly earnings, heavy machinery maker Caterpillar Inc. , chemicals company DuPont and conglomerate United Technologies Corp. all said important segments of their businesses have felt the sting of the housing downturn.
The dollar climbed broadly on Wednesday as investors worried about problems from the subprime mortgage market cut their exposure to risky assets in general, benefiting the highly liquid dollar.
Stocks were up overall on strong earnings, but the Dow Jones U.S. home builders index fell to an almost four-year low of 476.01 before recovering to rise slightly.
U.S. Treasury debt prices were mixed.
Brown said the existing home sales report "has offset some of the earlier weakness (in Treasuries). I think the bond market had been braced for bad news and we got bad news, or worse than anticipated."
Existing-home sales were off 3.8 percent in June and hit their lowest level since November 2002 when sales posted a 5.73 million unit annual pace.
Economists polled by Reuters were expecting home resales to fall to a 5.87 million-unit pace from the 5.99 million-unit rate initially reported for May. Sales in May were revised to 5.98 million units.
The inventory of homes for sale fell 4.2 percent to 4.196 million units at the end of June, which represents an 8.8 months' supply and matched the May supply.
The median home price in June edged up 0.3 percent to $230,100 from year-ago levels and was the first such increase in 11 months.
"We are encouraged that home prices, at least for now, have stopped declining," said Lawrence Yun, senior economist for the trade association. NAR has forecast a 1 percent to 2 percent decline in median existing home values for the year, he said.
"If they were to drop much larger than that, it could tip the economy into recession," Yun said.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended July 20 fell 3.6 percent to 609.0, its lowest level since the week ended Feb. 16 when it stood at 606.6.
While Wednesday's housing data was fairly flat, some saw it as breaking a cycle of bad news for the sector.
"At this point, expectations for housing are so low that it may in fact be almost a relief that it wasn't worse," said Boris Schlossberg, senior currency strategist for Dailyfx.com in New York.
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