US Home Sales Drop in Record Rate

US home sales drop in record rate

Existing home sales plummeted by a record 27 percent in July as the benefits of the tax credit by the government weakened, showing that unemployment threatens to slow down the US economic recovery.

The National Association of Realtors announced today in Washington that sales of homes were recorded at 3.83 million, its lowest pace in a decade, and worse than the bleakest economic forecast made by Bloomberg News. Demand for single-family houses plunged to its lowest level in 15 years and the number of homes on the market spiked.

Stocks dropped and Treasury securities rallied amid fears that the industry at the center of the financial meltdown will lead the US back into recession.

The latest reports on unemployment claims and manufacturing signal a slowdown in growth that may convince the Federal Reserve to implement additional actions to spur the economy.

“Today's data do not bode well for home prices,” said Michelle Meyer, senior economist at Bofa Merrill Lynch Global Research in New York.

“There is a decent chance we reach a new bottom for home prices. There's going to be a prolonged, painful drop,” Meyer said.

The 500 Index of Standard & Poor dipped 1.5 percent and closed at 1,051.87 in New York, the lowest closing value since July 6. Yields on benchmark 10-year treasury notes fell to 2.49 percent. Meanwhile, the two-year note yield hit a record-low 0.4542 percent.

Records of existing home sales have been kept since 1999, and its latest recorded pace has been the lowest since then. Some economists predicted that sales would drop 13 percent. A Bloomberg survey of 74 economists suggested numbers between 3.96 million to 5.3 million.

Posted by James Fried on Wednesday August 25 2010, 5:32 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0