Thursday, August 24, 2006

Home Sales Weak

Bloomberg.com: News: "U.S. Economy: Home Sales Drop, Supply Jumps to Record (Update3)

By Shobhana Chandra and Joe Richter
Aug. 23 (Bloomberg) -- Sales of previously owned U.S. homes fell in July to the lowest in more than two years, a slowdown that may lead the Federal Reserve to keep interest rates steady for a second month.
Purchases declined 4.1 percent, more than economists forecast, to an annual rate of 6.33 million, the National Association of Realtors said today in Washington. Sales fell 11.2 percent from a year earlier and the supply of unsold homes climbed to a record.
The report comes a day after Chicago Fed President Michael Moskow said a sharp decline in housing, which by some estimates accounted for more than half of growth over the last three years, would be a risk to the economy. While Moskow also warned of higher interest rates to stem inflation, economists say slackening growth is more likely to stay the Fed's hand.
``This plays into the Fed's hope and forecast that growth is going to stay moderate and that the pressures we are seeing on inflation will be transitory,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``If they aren't done yet, they are almost finished.''
Shares of residential construction companies tumbled. The 16-member Standard & Poor's Supercomposite Homebuilding Index dropped 2.3 percent. The S&P 500 lost 0.4 percent to 1293.13 at 12:40 p.m. in New York. "

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