Sales of US homes fall sharply as confidence drops

Sales of homes in the US fell more sharply than expected in July, the National Association of Realtors reported yesterday.

The data underlined the slowdown in the property market and added to fears over the health of the broader economy.

The number of homes sold fell 4.1 per cent to 6.33 million, against an expected decline of about 1 per cent from June's total. The supply of unsold homes rose to a record 7.3 months of sales, up from four months early last year.

The fourth consecutive monthly decline in sales leaves the measure 14 per cent below its peak last June and at the lowest level since January 2004. The average home price has risen less than 1 per cent in the past year.

US stocks dipped on the news, which has potential implications for the spending power of consumers. But the lightly traded treasury market appeared to have already priced in the worse-than-expected reading, with yields briefly trading lower but then continuing the day's rise. "A continued softening in the housing data - expected to sap consumer demand - should help the Fed refrain from a rate hike during the next FOMC's [Federal Open Market Committee] meeting on September 20th," said economists at ING Financial Markets.

Builders' confidence is at a 15-year low and buyers' confidence is at fresh lows.

Fears that the housing slowdown is spreading to other sectors were compounded last week when a University of Michigan survey found consumer confidence was at its lowest level since Hurricane Katrina last year.