Sales of previously owned U.S. homes fell more than forecast last month to the lowest level since March 2004, evidence of the end of a five-year housing boom that will slow the economy.
Purchases declined 5.7 percent to a 6.6 million annual rate from November’s revised number of 7 million, the National Association of Realtors said Wednesday in Washington.
Sales, which have been slowing from the record monthly pace reached in June, still finished 2005 at an all-time high.
While economists forecast a gradual decline in sales, December’s slump raises the risk that the slowdown could accelerate and become an even bigger drag on the economy this year.
The drop puts Federal Reserve policymakers on notice that more interest-rate increases may not be necessary, according to Christopher Low.
“Higher rates at this point risk turning the gentle decline of the second half of 2005 into a housing rout in 2006,” said Low, chief economist at FTN Financial in New York. “(Recent housing reports) make the most compelling argument for the Fed to stop raising the overnight rate.”
A rise in the supply of homes relative to sales, less home- price appreciation and higher mortgage rates may also limit refinancing, which has been helping drive spending and economic growth, economists said.
Shares of home-improvement retailers, including Home Depot Inc., and homebuilders D.R. Horton Inc., Centex Corp. and Pulte Homes Inc. declined.
The Standard & Poor’s 500 Index fell 2.18, or 0.2 percent, to 1,264.68 in New York, for its first drop this week. U.S. Treasuries fell, pushing yields higher. The yield on the benchmark 10-year note added almost 9 basis points to 4.48 percent.
The pace of home resales was slower than any forecast in a Bloomberg News survey of 59 economists.
Purchases had been expected to fall to a 6.87 million rate from a previously reported 6.97 million in November.
The Realtors group forecasts existing-home sales to slow by 5 percent in 2006.
