US home sales pace likely slowed in July from previous month

Published August 21, 2014

| Associated Press

The National Association of Realtors reports on sales of existing homes in July. The report is scheduled to be released at 10 a.m. Eastern on Thursday.

SALES FALL: The expectation is that sales dropped slightly to a seasonally adjusted annual rate of 5.01 million last month, according to a survey by data firm Fact Set. In June, homes sold at a yearly pace of 5.04 million.

SUMMER BUYING: Home-buying was hammered at the start of the year by harsh winter weather, rising interest rates and sluggish wage growth. Rising prices hurt affordability and mortgage rates opened the year at levels that slowed buying activity. Sales of existing homes continue to lag last year's pace of 5.1 million. Annual sales of 5.5 million are consistent with a healthy housing market, according to analysts.

Many economists consider home sales to be a missing piece of the economic recovery. Federal Reserve Chair Janet Yellen recently told Congress that housing has proven to be disappointing this year.

But several indicators suggest that activity has begun to improve during the summer.

New-home construction increased 15.7 percent in July to a seasonally adjusted annual rate of 1.09 million homes, the Commerce Department reported Tuesday.

Applications for building permits, considered a good sign of future activity, also showed strength in July, advancing 8.1 percent to an annual rate of 1.05 million after declining in the prior two months.

Separately, the sentiment index from the National Association of Home Builders and Wells Fargo rose in August to 55, up two points from a revised 53 for July. Readings above 50 indicate more builders view sales conditions as improving.

Home prices are also increasing at a slower clip, which should help ease affordability pressures.

Data provider CoreLogic said that prices rose 7.5 percent in June compared with 12 months earlier. That's the smallest year-over-year gain in 20 months.

All of that should help housing overcome the obstacles it encountered last summer, when rising prices and higher mortgage rates pushed would-be buyers onto the sidelines.

Average rates for 30-year mortgages fell to 4.12 percent from 4.14 percent, mortgage company Freddie Mac said last week. Mortgage rates are below the levels of a year ago. They have fallen in recent weeks after climbing last summer when the Fed began talking about reducing the monthly bond purchases it was making to keep long-term borrowing rates low.

Even though the Fed has trimmed it bond-buying, rates have fallen below its average of 4.53 percent at the start of the year.

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