Home Inventories Rise to 16-year High

By Rex Nutting

RISMEDIA, August 29, 2007-(MarketWatch)-Inventories of unsold single-family homes increased 2.2% to 3.85 million in July, sending the inventory in relation to sales to the highest level in 16 years, the National Association of Realtors reported Monday.

Resales of single-family homes and condominiums fell 0.2% to a seasonally adjusted annual rate of 5.75 million. The results were stronger than the 5.69 million sales pace expected by economists surveyed by MarketWatch, but still the slowest since November 2002.

Sales were down 9% compared with a year earlier but were essentially unchanged from June’s 5.76 million pace, despite disruption in the pipeline for mortgage loans, the NAR said.

Sales of single-family homes fell 0.4% to a 5.0 million seasonally adjusted pace in July.
Inventories of single-family unsold homes represented a 9.2-month supply at the July sales pace, the highest since October 1991.

For all homes – condos and single-family homes – the inventory rose 5.1% to a record 4.59 million, representing a 9.6-month supply. Condo inventories surged 20% to 742,000, an 11.9-month supply at the July sales pace.

Inventories typically fall in July, said Lawrence Yun, senior economist for the real estate trade group. The inventory figures are not seasonally adjusted.

“The inventory is very high,” Yun said, adding that rising foreclosures might be increasing levels of inventories by 5% to 7%. But he also said the problems in the subprime market won’t damage the broader economy.

Payment resets for subprime mortgages will cost borrowers about $30 billion, Yun said, a significant blow to those families but negligible in the $13 trillion economy.

July sales are based on closing of sales that were contracted in May or June. About a quarter of the realtors surveyed said they had a client whose previously committed loan had fallen through, Yun said. Further disruptions in the mortgage market in August should impact sales in coming months, Yun said.

The median sales price was $228,900, down 0.6% since last July.

By sector, July’s sales of single-family homes dipped 0.4% to an annualized 5 million, while condominium sales rose 1.4% to a seasonally adjusted annual rate of 750,000.

By region, sales fell by 2.2% in the Midwest, were unchanged in the South, rose 1% in the Northeast and fell 1.8% in the West.

Rex Nutting is Washington bureau chief of MarketWatch.