Ahead of the Bell: Home sales - BusinessWeek

But the sales pace probably won't be enough to signal a rebound for an industry beset by falling prices, foreclosures and paltry demand. Economists expect the July sales pace rose to a seasonally adjusted annual rate of 4. Sales of previously occupied homes fell in June for a third straight month to a seasonally adjusted annual rate of 4. In a healthy economy, people buy roughly 6 million homes per year. Falling home prices have kept many people from selling their houses and taking jobs in growing areas. That has reduced consumer spending, which drives about 70 percent of economic activity. Purchases made by first-time homebuyers are dropping. Bigger down payments, tougher lending rules, high debt and a shortage of desirable starter homes have kept many would-be buyers away. Even some with good credit and enough money for a down payment are holding off because they are worried home prices will keep falling. Since the housing boom went bust in 2006, sales have fallen in four of the past five years. Declining home prices and super-low mortgage rates haven't been enough to boost sales this year. Wealthy buyers are still purchasing homes prices at more than $1 million in the affluent Northeast and growing Midwest. And investors are scooping up dirt-cheap homes in the battered South and West for less than $100,000. Foreclosures and short sales -- when a lender agrees to sell for less than what is owed on a mortgage -- make up an increasingly large portion of home sales. Even homes that are under contract are falling apart before the sale is closed. The Realtors' group has noted that an increasing number of deals have been canceled because appraisals came in below a negotiated price, scuttling home loans in the process. Re-sold homes are a bargain compared with new homes. The median price of a new home is more than 30 percent higher than the median price for a previously occupied home. Most economists say home prices will keep falling, by at least 5 percent, through the rest of the year. Many forecasts don't anticipate a rebound in prices until at least 2013. He said a housing rebound will require "consumers and banks and the private sector working alongside government. Realtors