Existing home sales drop in July to slowest pace in nearly 5 years

[Purveyor]

Source: Associated Press

WASHINGTON: Sales of existing homes in the U.S. dropped for a fifth straight month in July, falling to the slowest pace in nearly five years, while home prices fell for a record 12th consecutive month.

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The deep slump in housing, combined with recent severe turmoil in financial markets, has raised worries about a possible recession. But many economists believe the Federal Reserve will ward off a full-blown downturn by reducing a key short-term interest rate should financial market conditions fail to stabilize.

The steep slump in housing has trimmed overall growth for the past year and recently the economy has been shaken by spillover effects in financial markets. Rising defaults in subprime mortgages have triggered a serious credit crunch as investors have worried that hedge funds and other big investors in securities backed by subprime loans could suffer serious losses.

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However, many analysts believe it could be months before housing stabilizes because of the threat that rising delinquencies could dump further homes onto an already glutted market.

Read more: http://www.iht.com/articles/ap/2007/08/27/business/NA-FIN-ECO-US-Homes-Sales.php