June 26, 2007	Tuesday	Jamadi-us-Sani 10, 1428

WASHINGTON, June 25: Sales of existing US homes fell in May to their lowest level in four years, dashing hopes for a rebound in the struggling property market, an industry report showed on Monday.

The National Association of Realtors (NAR) said existing home sales dropped 0.3 per cent to an annualised pace of 5.99 million last month. Most economists had forecast a sales clip of 6.00 million properties.

The snapshot also showed that the glut of millions of homes flooding the market rose to a record high for a second straight month.

Its release comes days before Federal Reserve policymakers are due to deliberate US interest rates, although most Fed-watchers expect the central bank to keep rates on hold amid fears about inflationary pressures.

“The housing market may not be in a free fall but it has not hit bottom yet either. We still seem to be in the sellers’ denial phase of the market,” said Joel Naroff of Naroff Economic Advisors.

The association blamed the sales drop, the third straight monthly fall, largely on a dwindling number of buyers ready to commit to an expensive property purchase.

“I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,” said NAR economist Lawrence Yun.

Experts say tighter mortgage lending standards, particularly for Americans with patchy credit histories, and mounting home foreclosures have also harmed sales.

The monthly report also revealed that the number of homes for sale across America continued to rise last month, increasing five per cent from April to a record inventory of 4.43 million properties.

That represents an 8.9-month supply at the current sales pace, according to the NAR. It is also marks the second straight month that the inventory of unsold homes has struck a record.

The number of unsold properties swamping the market has ballooned by 23.5 per cent in the past year, as market dynamics have switched dramatically to favour potential buyers over sellers.The monthly snapshot also showed that falling prices -- following a long boom in the property market that ended last year -- failed to drum up improved demand as sales fell to their lowest level since June 2003.

The median home sales price fell 2.1 per cent to $223,700 compared with May 2006.

“It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market,” Yun said.

The US property market has been in a slump for over a year, partly as consumers have been buffeted by spiking gasoline costs.

The report is not likely to make happy reading for Fed chairman Ben Bernanke ahead of Wednesday’s two-day Fed meeting.

The Fed would normally be expected to cut interest rates in such times to give homeowners some relief, but the Fed has been preoccupied with fighting inflationary threats such as surging oil prices.

The central bank is widely expected to keep its key fed funds rate anchored firmly at 5.25 per cent this week, where it has been for a year.

Naroff said the troubled state of the market, however, will soon force the Fed to focus on housing more fully, especially because of its knock-on effect on the wider economy which has slowed significantly in the past 12 months.

The latest NAR figures showed existing home sales are a hefty 10.3 per cent below the 6.68 million-unit pace of May 2006. The association revised up its reading of April sales slightly to 6.01 million from an initial estimate of 5.99 million homes.

The report followed a government survey last Tuesday showing new home construction fell 2.1 percent in May.—AFP