MercoPress. South Atlantic News Agency

Housing sector gives no respite to US markets

Concern that United States house prices could fall sharply has returned after a key survey showed that sales fell to a near five-year low in the year to July. Sales of existing homes fell 0.2% to 5.75 million units in the year, the lowest since November 2002, said the National Association of Realtors (NAR).

It marks the first time that the US's main estate agent body had reported a decline in 12 consecutive months. Last week a separate study said sales of new homes surprisingly rose in July. That finding gave Wall Street a major boost on Friday, but the latest NAR data caused the main US share indexes to fall on Monday trading in New York. The Dow Jones was down 56 points to 13.322 while the Nasdaq lost 15 points to 2.561 and S&P 500, 13 points to 1.467. NAR added that the supply of unsold single-family homes has now hit its highest level in 16 years. Concerns over the US housing sector, and the resulting market turmoil of recent weeks, centered on the so-called sub-prime mortgage sector. This gives higher risk loans to people with poor credit histories. Bernard Markstein from the National Association of Home Builders forecasted that job losses in the US construction sector could top 1 million if a housing downturn tips the economy into recession and tighter access to credit dampens business investment. "With what's happening with the mortgage market, the financial markets in general, I think we'll continue to shed workers at least for six months, maybe as much as a year" said Markstein, director of forecasting at the NAHB. "The ability of nonresidential to continue absorbing additional workers is going to be limited, and that's going to put downward pressure on construction employment overall," he said, adding that cuts may be deeper than in the 1990s. Construction employment fell about 15% in both the US 1990s and 1980s recessions, and it dropped about 18% in the recession of the mid-1970s, according to the Bureau of Labor Statistics (BLS). US construction companies employ 7.7 million, according to the BLS, down about 75,000 from a peak in September 2006. The sector's unemployment rate of 5.9% compares with 4.6% for the overall labor force. A 15% decline now would mean more than 1 million jobs lost. Sub-prime default levels have risen to record highs over the past year in the face of higher US mortgage rates, raising fears that this could hamper credit availability in the broader market. Investor confidence was further hit on Monday after Goldman Sachs analyst William Tanona cut his third-quarter earnings forecasts for three firms exposed to the sub-prime slump - Bear Stearns, Lehman Brothers and Morgan Stanley. European markets were mixed on Monday. The FTSE Eurofirst 300 added 0.33% to 1,514.43, while in Paris the CAC-40 gained 0.38% to 5,590.54. On the other hand, Madrid's IBEX fell 0.2% to 14,305.5 while the Dax dropped 0.28% to 7,485.99 in Frankfurt. London's markets were closed for a public holiday.