Beyond headlines, more grim housing data

By Patrick Rucker

WASHINGTON (Reuters) - The U.S. housing market will stay in a slump until buyers feel more confident about the economy and their own finances, and sellers are ready to accept more realistic prices.

The pace of existing home sales fell in August for the sixth straight month to the lowest rate in five years as many prospective buyers were turned away by lenders, the National Association of Realtors said on Tuesday.

While that weak sales number clearly indicates a present-day slump, gloomy consumer sentiment and signs of bloated inventory point to more troubled times ahead.

The number of existing single-family homes on the market hit a record in August, while a gauge of consumers' desire to buy a home hit the lowest point since March 1996. Both pieces of data signal more near-term problems for the housing sector, said David Berson, the chief economist at Fannie Mae.

"People know that home sales are slow and that this is not the best time to sell a house. Newspapers' reports on problems in financial markets are reducing the appetite for real estate purchases," he said.

A much-publicized spike in the number of late and failing home loans has shaken the confidence of mortgage investors and potential homeowners alike, Berson noted.

On a rolling 12-month average, the percentage of people who say they plan to buy a house in the next 6 months is the lowest in 11.5 years, according to the Confidence Board's U.S. consumer confidence report, released on Tuesday.

"Most economists don't view sentiment as a separate indicator, but you can view it as a nice summary of these other factors," Berson said. "Clearly it is not favorable, whatever rating you give it."