Home Resales Hit Lowest Point in 21 Months

January 25, 2006 (Bloomberg) — Sales of previously owned U.S. homes fell more than forecast last month to the lowest level since March 2004, evidence of the end of a five-year housing boom that will slow the economy. Purchases declined 5.7 percent to a 6.6 million annual rate from November’s 7 million, the National Association of Realtors said today in Washington. Sales, which have been slowing from the record monthly pace reached in June, still finished 2005 at an all-time high of 7.072 million.

While economists forecast a gradual decline in sales, December’s slump raises the risk the slowdown could accelerate and become an even bigger drag on the economy this year. The drop puts Federal Reserve policy makers on notice that more interest rate increases may not be necessary, according to Christopher Low. “Higher rates at this point risk turning the gentle decline of the second half of 2005 into a housing rout in 2006,” said Low, chief economist at FTN Financial in New York. Recent housing reports “make the most compelling argument for the Fed to stop raising the overnight rate.”
Home Resales Fall [Bllomberg]