New figures show that sales of previously owned US homes fell to a six-month low in May, as prices dropped 4.6% from a year ago. The data point to a housing market still struggling to regain its footing.
The National Association of Realtors said sales slipped 3.8% from April to an annual rate of 4.81 million units, the lowest since November.
It was the second straight month of declines in home re-sales, but the fall was smaller than economists had expected. While the fall in sales last month was partly due to bad weather in some parts of the country, including tornadoes, it underscored the fundamental weakness in the sector.
The report was also the latest set of data to confirm a sustained weakness in the wider US economy in the second quarter, which has been marked by a sharp slowdown in regional factory activity, soft retail sales and weak employment growth.
In the 12 months to May, home re-sales were down 15.3%. The general weak housing market tone was underscored by the median home price, which at $166,500 was 4.6% lower than a year earlier.
The housing market is being squeezed by an overhang of unsold homes and a tide of repossessions, which are depressing prices. NAR chief economist Lawrence Yun said, however, that he believed sales had bottomed.
US warned on credit rating
Ratings agency Fitch said today it would place the US credit rating on watch negative if its debt ceiling is not raised by August 2, when the US Treasury has warned that it may not be able to borrow more.
'If we reach the second of August without a lifting of the debt ceiling, Fitch would assign a rating watch negative to the US sovereign ratings,' Andrew Colquhoun, head of Asia-Pacific sovereign ratings with Fitch, said at a conference.
Meanwhile, Standard & Poor's said today that the risk of a downgrade to the credit rating of the US has increased due to a lack of political consensus on how to employ the country's balance sheet flexibility.
'Theoretically, there's a lot of flexibility on the fiscal and the monetary side: you have a central bank that can expand its balance sheet, and that's a real boon," Moritz Kraemer, head of sovereign credit ratings for Europe at Standard & Poor's, said.
'But the problem is this flexibility needs to be employed and for that you need political consensus. That's not very visible right now,' he added.
'The downside risks in the medium term have increased and we did assign a negative outlook that signifies there's a one in three chance the rating might go down in the next few years,' Kraemer told a Euromoney conference in London.
