Existing-home sales fall in June
Sales of existing homes fell in June with some indications of buyer unease, according to the National Association of Realtors.
Total existing-home sales — including single-family, townhomes, condominiums and co-ops — declined 3.8 percent to a seasonally adjusted annual rate of 5.75 million units in June, compared with a downwardly revised level of 5.98 million in May.
Existing-home sales are 11.4 percent below the 6.49 million-unit pace in June 2006.
Lawrence Yun, NAR senior economist, said some consumers are uncertain.
“Home buyers have been getting mixed signals about the housing market, which is causing some of them to hesitate,” he said. “Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales, but fewer risky loans will put the market on a healthier path.”
Regionally, existing-home sales in the South fell 1.7 percent to an annual sales rate of 2.26 million in June, and are 11.4 percent below a year ago. The median home price in the South was $190,800, up 0.7 percent from June 2006.
Existing-home sales in the Midwest declined 2.8 percent in June to a level of 1.37 million, and are 8.1 percent below June 2006. The median price in the Midwest was $171,700, which is 1.5 percent below a year ago.
Existing-home sales in the West dropped 6.8 percent in June to an annual pace of 1.10 million, and are 19.1 percent below a year ago. The median price in the West was $340,000, down 0.4 percent from June 2006.
Existing-home sales in the Northeast are down 7.3 percent to a level of 1.01 million in June, and are 7.3 percent lower than June 2006. The median existing-home price in the Northeast was $294,400, up 1.8 percent from a year ago.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.66 percent in June, up from 6.26 percent in May; the rate was 6.68 percent in June 2006.
The national median existing-home price for all housing types was $230,100 in June, up 0.3 percent from June 2006 when the median was $229,300. The median is a typical market price where half of the homes sold for more and half sold for less.
Total housing inventory fell 4.2 percent at the end of June to 4.2 million existing homes available for sale, which represents an 8.8-month supply at the current sales pace, the same as a downwardly revised 8.8-month supply in May.
The statistics came out at 10 a.m., a day after Countrywide Financial, the largest mortgage lender in the country, held a quarterly conference call that painted a picture of softening home prices and rising delinquencies and defaults. Countrywide CEO Angelo Mozilo further suggested that because of high inventory, the housing market will not begin recovering until 2009, a relatively pessimistic view.
“It just takes a long time to turn a battleship around, and this is a huge battleship and it’s heading in the wrong direction,” he added. “First we have to get it to slowdown, then stop, then turn. It’s going to take the balance of this year to get this thing to look like it is slowing down, 2008 to get it to slow down and stop, and 2009 to head in the other direction.”
Countrywide posted earnings of $485 million, a decline of 33 percent. Following the news, Standard & Poor’s 500-stock index dropped 2 percent on the day.
Mozilo also said he was optimistic. The first key to the turnaround is a reduction in housing inventory. “Once that turns around the psychology of the country changes,” he said. “Today, the potential buyers simply wait, because they’ll be able to buy the house cheaper tomorrow than today. That psychology has to change.”
American Standard sells bath and kitchen business
American Standard has found a buyer for its bath and kitchen business: Bain Capital Parnters, who has agreed to buy the group for $1.755 billion.
Bain Capital Partners is a global private investment firm — most recently, Bain Capital was one of four private investment firms to purchase Home Depot’s HD Supply unit.
Upon completion of the sale, Bain Capital will acquire all of American Standard’s bath and kitchen business, which had 2006 sales of $2.4 billion. The business manufactures and markets products under brand names including American Standard, Ideal Standard, Armitage Shanks, Porcher and Jado.
The sale closing is expected to occur early in the fourth quarter. American Standard said it will use proceeds of the sale primarily to repurchase common stock and reduce debt.
Earlier this year, American Standard announced its plans to separate its three business by selling bath and kitchen, spinning off its vehicle control systems business and retaining its largest business, in air conditioning systems and services. Following the spinoff and the sale, American Standard Cos. will change its name to Trane.
“This is a major milestone in our plan to separate American Standard into three focused, better understood companies,” said Fred Poses, American Standard chairman and CEO. “We believe that Bain Capital’s all-cash offer provides excellent value for our shareowners.”
Canada USW, forest companies reach stalemate in union negotiations
Over the weekend, nearly 6,500 members of the United Steelworkers (USW) union’s Wood Council in British Columbia went on strike, following a stalemate in negotiations with 31 member companies of Forest Industrial Relations [FIR], a bargaining group; Island Timberlands, a private forestry company; and timber company International Forest Products (InterFor).
The British Columbia coastal region accounts for 12 percent of total British Columbian softwood lumber production and 6 percent of total Canadian production, according to RISI (Resource Information Systems).
The USW issued a 72-hour strike warning that expired on July 21. InterFor workers joined the strike on Saturday.
“This strike is about stopping the race to the bottom that all forest workers are facing,” said Steve Hunt, USW Western Canada director.
Among the core issues argued by the USW are requests for severance for all workers affected by permanent mill closures — including employees who were laid off during downtime, prior to the permanent closure of the mill. The union also is requesting more input in making employee shift schedules and a halt to companies’ use of contracted, non-union employees to participate in union negotiations.
Several British Columbia-based forest products companies are affected by the strike, including West Fraser, one of North America’s largest lumber producers.
FIR, which represents West Fraser, Western Forest Products and 29 other large lumber producers, has argued conditions are difficult across the industry, and further concessions would put a further dent in an already difficult market.
Terry Lineker, CEO of FIR, said the market pressures faced by forest products companies mean employers must remain competitive or risk a position that “will severely damage the industry.”
FIR has proposed a wage increase of 2 percent effective June 15 of this year, and an additional 3 percent on June 15, 2008. The bargaining group also offered gain sharing “if FIR companies recover from the current downturn,” and agreed to some improvements in shift scheduling, according to a statement from FIR.