In further evidence of a sharp slowdown in the once-booming housing market, sales of existing homes fell for a sixth straight month in September and the median sales price dropped by a record amount.
The National Association of Realtors reported Wednesday that home sales fell by 1.9 percent in September to a seasonally adjusted annual rate of 6.18 million units, the slowest pace since January 2004.
The median price of a single-family home fell to $219,800 last month, a drop of 2.5 percent from the price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades. Home prices had also fallen in August and it marked the first back-to-back declines in 16 years.
The median price is the middle point, where half sell for more and half sell for less.
Housing, which had set sales records for both new and existing homes for five consecutive years, has been rapidly cooling this year, but economists with the Realtors suggested that the decline could be hitting bottom.
“The worst is behind us as far as a market correction — this is likely the trough for sales,” said David Lereah, the Realtors’ chief economist. “When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.”
Other economists suggested the weakness in housing could last for a number of more months and perhaps as long as another year because of a huge backlog of unsold homes.
“The housing slowdown is just over a year old. It probably has another year to run,” said Patrick Newport, U.S. economist at Global Insight. “The market will probably not turn around until at least the second half of 2007.”
Newport predicted that existing home sales will fall by 9 percent this year and will drop by an even bigger 14 percent in 2007.
The Federal Reserve on Wednesday announced that it was holding a key interest rate steady for a third straight month after two years of steady increases that ended in August.
Analysts said they believe the Fed will not raise rates further, partly out of concern about the impact of further increases on the fragile housing market. Economists, however, said they are not looking for rate cuts either given the Fed’s continued worries about inflation.
For September, sales of existing homes were down in all sections of the country except the South, which posted a small 0.4 percent increase.
Sales fell the most in the Northeast, a drop of 3.7 percent, followed by the West, where sales were down 3.1 percent, and the Midwest, where sales fell by 2.8 percent.
The inventory of unsold homes, after climbing to all-time highs, fell for a second straight month, decreasing 2.4 percent, to 3.75 million unsold homes at the end of September, which represents a 7.3 months supply at the September sales pace.
Sales of single-family homes dropped by 1.6 percent to an annual rate of 5.42 million units while sales of condominiums fell by 3.2 percent to an annual rate of 763,000 units.
The 2.5 percent drop in the price of single-family homes pushed them down to $219,800 while condominium prices fell by 3.2 percent to a median price which was also $219,800.