WASHINGTON – The number of Americans who bought previously occupied homes rose slightly last month but remained at depressed levels as more deals were cancelled at the last minute, a sign that potential buyers are worried about the housing market.
Home sales rose 1.4 per cent last month to a seasonally adjusted annual rate of 4.97 million, the National Association of Realtors said Monday. That’s below the six million that economists say is consistent with a healthy housing market and slightly ahead of last year’s sales – the worst in 13 years.
The sales are measured when buyers close on the homes.
Many deals are falling apart before that point. One third of U.S. Realtors say they’ve had at least one contract scuttled in October, up from 18 per cent in September.
The U.S. housing market has not fully recovered from the boom and bust cycle that began in the middle of the last decade and resulted in one of the worst real-estate crashes in American history.
In comparison, the Canadian real-estate market didn’t rise as quickly, didn’t fall as far during the 2009-10 recession and has fully recovered in terms of the value of homes in most major centres.
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The Canadian market has been helped by a stronger banking industry and somewhat lower unemployment compared with the United States. Both countries have experienced historially low interest rates that help reduce the cost of borrowing to buy a house but household debt is also at worrisome levels.
More than two years after the recession officially ended, many American can’t qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling. Home sales are also being hurt by a steep decline in first-time buyers.
Sales in the United States have fallen in four of the five years since the housing boom went bust in 2006. Declining prices and record-low mortgage rates haven’t been enough to boost sales.
Most economists say U.S. home prices will keep falling, by at least five per cent, through the rest of the year. Many forecasts don’t anticipate a rebound in prices until at least 2013.
The high rate of foreclosures has made re-sold homes much cheaper than new homes. The median price of a new home is roughly 30 per cent higher than the price of one that’s been occupied before – twice the normal markup.
The housing market continues to struggle even as the broader economy has shown some improvement in recent months.
The economy grew at an annual pace of 2.5 per cent in the July-September quarter. Many economists expect slightly better growth in the October-December quarter.
Last week, the government reported further improvement in the number of people seeking unemployment benefits for the first time. The number fell to 388,000, the fewest since April.
In October, the economy added a net total of 80,000 jobs. It was the 13th straight month of gains. Still, the additional jobs were fewer than the roughly 125,000 that are needed each month just to keep up with population growth.