U.S. has most unsold homes since '85
WASHINGTON (AP) - May 23, 2008 The National Association of Realtors reported Friday that
existing home sales dropped by 1 percent to a seasonally adjusted
annual rate of 4.89 million units, matching the all-time low set in
January. These records, which cover single-family homes and
condominiums, go back to 1999.
The median price for an existing home dropped 8 percent,
compared with a year ago, to $202,300. It was the second largest
price decline on record and analysts predicted prices would fall
further in the months ahead given the huge backlog of unsold
single-family homes.
The number of unsold single-family homes in April rose to a 10.7
months supply at the current sales pace, the highest level since
June 1985.
"The housing market continues to slide away. The very large
increase in inventories suggests that there are much larger price
declines coming," said Mark Zandi, chief economist at Moody's
Economy.com.
On Wall Street, the Dow Jones industrial average ended a week of
big losses by declining further on Friday, falling 145.99 points to
close at 12,479.63. It was the Dow's worst week since early
February with investors rattled by the relentless rise in energy
prices.
The housing industry is being battered by a prolonged slump that
has seen sales and prices fall sharply in many parts of the country
and mortgage foreclosures soar. The slump in housing and a related
credit crunch, which has resulted in multibillion-dollar losses at
some of the nations' largest financial institutions, has depressed
overall economic growth and raised worries about a possible
recession.
Those troubles, along with soaring gasoline prices and higher
job layoffs, have sent consumer confidence plunging, making a
housing recovery even more difficult.
"Credit remains tight, the economy is losing jobs and house
prices are falling in more places and at an accelerated rate,"
said Patrick Newport, an economist at Global Insight. "All of this
adds up to a dismal house-selling season."
Newport said he expected existing home sales would keep falling
until the end of this year, probably dropping by another 10
percent, before starting a gradual recovery early next year.
He predicted home prices would continue to slide probably until
next spring because the rising tide of mortgage foreclosures meant
even more homes were being dumped on an already glutted market,
further depressing prices.
As prices fall, it keeps more people sitting on the fence,
analysts said, because prospective buyers don't want to purchase an
asset that has the potential to fall further in price if they delay
making the purchase.
"With prices collapsing, the incentive not to buy a home is
increasing by the week, and with inventory showing no sign of
improvement, prices will keep falling," predicted Ian Shepherdson,
chief U.S. economist at High Frequency Economics.
Sales were down the most in the Midwest, a drop of 6 percent,
followed by a 4.4 percent decline in the Northeast. Sales were up
6.4 percent in the West, a region of the country where prices had
fallen by the sharpest amount, and were unchanged in the South.
Even with the weak results for April, Lawrence Yun, chief
economist for the Realtors, said he saw reasons for optimism that
sales would start to rebound in the second half of this year as
more types of mortgages become available, including programs
supported by mortgage giants Fannie Mae and Freddie Mac and the
government's Federal Housing Administration.
"I would encourage buyers who were disappointed by poor
mortgage options to take another look at the market because the
lending changes are significant," Yun said. "The second half of
the year should be notably better in terms of home sales."
Yun noted that some areas of the country where prices have
dropped by double-digit amounts such as San Diego, Calif., and Fort
Myers, Fla., were starting to see sales increase now because prices
have fallen enough to lure buyers back into the market. He said the
sales increase in the West could be attributed at least in part to
the fact that this region of the country saw prices fall the most
in April.
While the decline in the median price - the midpoint where half
the homes sold for more and half for less - was 8 percent compared
with April 2007, the price decline in the West was 16.7 percent.
Prices fell 7.7 percent in the Northeast, 5.1 percent in the South
and 2.9 percent in the Midwest.
The Bush administration is counting on the 130 million economic
stimulus payments now being made to give a significant boost to the
economy in the second half of this year and help keep the country
out of recession.
The Treasury Department reported that as of Friday 6.2 million
stimulus payments had been made over the past four weeks, totaling
$4.93 billion. Officials said that figure represents the near
completion of all direct deposits with the expectation that the
mailing of checks will significantly increase in coming weeks as
the government completes the mailing of regular tax refund checks.