Existing Home Sales Fell in April to Another Low

 

Stocks took a dive on Friday after a report confirmed fears that the housing slump, which has weighed on nearly every corner of the nation’s economy, was nowhere near its end.

Sales of previously owned homes, which make up the bulk of the housing market, dipped 1 percent in April, to an annual rate of 4.89 million, the second consecutive month that sales have declined. That figure represents another record low, although the report, put out by the private National Association of Realtors, dates only to 1999.

While sales were slightly better than economists had expected, Wall Street was unimpressed. The Dow Jones industrials dropped 146 points on Friday, capping the worst week in the stock markets since February.

The Dow closed at 12,479.63, down more than 500 points from Monday’s opening bell. The Standard & Poor’s 500-stock index, a broader measure of the American stock market, also stumbled, slipping again on Friday to finish down 3.5 percent for the week.

Bond prices rose as investors turned to the safety of government notes. The benchmark 10-year Treasury note rose 18/32, to 100 8/32. Its yield, which moves in the opposite direction, fell to 3.84 percent, from 3.91 percent.

After a period of relative calm on Wall Street, investors seemed shaken by the resurgence of economic problems on several fronts. Oil, which some thought had reached a plateau at $110 a barrel, suddenly surged on reports that experts had decided dwindling supplies would not be able to keep up with global demand. Oil settled on Friday at $132.19 a barrel, up nearly $6 since Monday.

The price of oil, which affects not only the cost of gasoline but also the price of common consumer products, has risen nearly $20 a barrel in May alone.

The high cost of fuel is driving fears that inflation will become unhinged. Consumers are already being squeezed by skyrocketing prices for food and gasoline, and a report this week showed businesses were forced to pay more for wholesale goods in April.

The home sales report on Friday topped off a dreary week. The median value of a previously owned home was $202,300 in April, down 8 percent from a year ago, the realty group said on Friday.

Homeowners have watched their property values plunge for months, although the slump comes after several years of a remarkable run-up in home prices. Still, economists say they believe the declines have discouraged purchases, as would-be buyers hold out for prices to fall further.

“Lower prices bring bargain hunters into the market,” Patrick Newport, an economist at Global Insight, a research firm, wrote. “But they also drive away buyers who view their homes as an investment. In today’s market, the fence sitters outnumber the bargain hunters.”

Inventories also ticked up in April. At the current sales rate, it would take nearly a year to clear out the current backlog of unsold homes.

Analysts fear that an increase in foreclosures will only add to the inventory overhang, pushing prices down further. Economists expect no substantial recovery in the housing market until at least the latter half of 2008.

“The sharp increase in inventories will continue to keep potential buyers out of the market and depress overall prices further,” Joseph Brusuelas, the chief economist of Merk Investments, wrote in a research note.

A loss of confidence among lenders has also put a damper on sales, as even Americans eager to buy a home are having difficulty procuring mortgages from lenders who have tightened their standards.

The report divides sales figures into four general regions of the country. According to the realty group, April sales dropped 6 percent in the Midwest and 4.4 percent in the Northeast, but rose 6.4 percent in the West. Sales stayed steady in the South.

The biggest decline came in sales of apartments and condominiums, which plunged 5.2 percent after two months of rising sales. Demand for single-family homes dropped 0.5 percent in April, according to the report.

Markets will be closed Monday for the Memorial Day holiday, but the subsequent four days will bring a more detailed look at the troubles in the housing market. The closely watched Case-Shiller index, scheduled to be released on Tuesday, will offer a snapshot of home prices across the country in March. The Commerce Department will also report on Tuesday on sales of new homes in April.

Reports are also due next week on consumer spending, personal income growth, durable goods orders and consumer confidence. A revised government estimate of economic growth in the first quarter will be released on Thursday.

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