Trade Group Lowers Forecast For Existing-Home-Sales

The National Association of Realtors decreased its forecast for 2007, but said the market wasn't likely to suffer any further sharp downturns.
By: Benton Ives-Halperin and Jeff Bater: The Wall Street Journal Online
Meanwhile, U.S. wholesalers saw their inventories increase during June at a rate higher than expected, while sales rose even faster, the government reported Wednesday.

In its latest forecast for the real estate market, NAR on Wednesday projected that existing home sales will fall 6.8% this year to 6.04 million, compared with its previous forecast of a 5.6% decline.

The outlook for new home sales continues to worsen. The NAR said new home sales are likely to fall 19.0% to 852,000, compared with the prior forecast of a 17.7% drop.

Lawrence Yun, NAR's senior economist, said the market was likely to be relatively stable going forward, suggesting that the worst drops in activity are behind the housing sector.

"Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who've been on the sidelines," Mr. Yun said in a statement.

Mr. Yun continued to forecast a relatively mild upturn in housing activity towards the end of this year and going into 2008.

"A modest upturn is projected for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008," he said.

NAR said existing home sales will rise to 6.38 million in 2008, still well below the record 6.48 million sold in 2006. New home sales, on the other hand, are likely to stay depressed through next year, at a level of 848,000 in 2008, down from previous forecasts for 878,000.

Mr. Yun said the housing recession has helped trim some of the speculative fat from the marketplace. "Serious buyers today have a long-term view of housing as an investment - speculators have left the market," he said.

The national median existing-home price is forecast to slip 1.2% to $219,300 this year, and then rise 2.0% in 2008. The median new-home price is expected to fall 2.3% this year to $240,800, and then rise 2.3% next year.

Inventories Increase

Wholesale inventories rose by 0.5% to a seasonally adjusted $398.49 billion, after climbing at the same, unrevised rate during May, the Commerce Department said.

The 0.5% increase in June inventories exceeded Wall Street analyst expectations for a 0.4% advance.

Sales of U.S. wholesalers rose by 0.6% in June to a seasonally adjusted $359.45 billion after surging an unrevised 1.3% in May.

The amount of goods on hand relative to sales didn't budge. The inventory-to-sales ratio measures how many months it would take for a firm to deplete its current inventory. The ratio held steady at 1.11 in June.

On a year-to-year basis, sales were 8.1% higher, while inventories rose 6.3% since June 2006.

Wholesalers' inventories of durable goods - meant to last three or more years - remained flat in June, after increasing 0.4% in May. Automotive stocks increased 1.3% after rising 1.2% in May; year over year, auto inventories were down 2.7% from June 2006. Inventories of metals increased 0.5%.

Durable goods sales rose 0.7%, after going down 0.4% in May. Auto sales decreased 0.2% but electrical sales rose 1.0% and computer equipment surged 5.4%.

Nondurable goods inventories increased 1.2% in June. Petroleum stockpiles rose 2.2%. June nondurable goods sales increased by 0.5%. Clothing sales rose 2.8%.