Russell, Dow fall on housing data
The bears dominated trading and the Russell 2000 (NYSE: IWM) and the Dow retreated on news that sales of existing homes fell in July. The small-cap index dropped up 9.48 points, or 1.19%, to 789.45. The Dow Jones Industrial Average (INDU) lost 56.74 points, or 0.42%, to 13,322.13.
The U.S. housing sector is still slumping, according to numbers released by the National Association of Realtors.
The inventory of unsold single-family homes rose 5.1% to 4.59 million available units, its highest level since 1991, the Washington, D.C.-based trade association reported after the opening bell. That represents a 9.6-month supply at the current sales pace, up from an upwardly revised 9.1-month supply in June.
However, total existing-home sales fell a less-than-expected 0.2% to a seasonally adjusted annual rate of 5.75 million units in July. Economists expected a drop to a level of 5.70 million following an upwardly revised level of 5.76 million in June.
The national median existing-home price fell 0.6% to $228,900 in July, compared with $230,200 in July 2006.
The data suggest that the U.S. housing sector is far from recovery. There have been signs this summer that lower property values and higher mortgage costs have hit consumer spending, which could put the brakes on economic growth. Consumption is about 70% of gross domestic product.
Stocks, which opened with modest declines, reacted by falling deeper into negative territory.
The bears dominated the session, with the Russell 2000 staying in the red the entire time, while the Dow managed to briefly pierce the flat line around 2:30 p.m. ET before falling again.
But there was a silver lining in the housing report, which also showed that sales increased in the West and Northeast but fell in the Midwest.
“The rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is promising because this was the first region that underwent sales and price weakness after the boom,” said Lawrence Yun, NAR senior economist. “Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path.”
The decline in sales also affected small-cap home builders, which saw their stock prices decline.
Single-family residence builder Tousa Inc. (NYSE: TOA) lost value, as did WCI Communities Inc. (NYSE: WCI), and Fairfax, Va.-based Brookfield Homes Corp. (NYSE: BHS).
