Existing home sales fell for the eighth time in the past nine months, a string of weakness expected to continue as the housing industry, mired in its worst slump in decades, battles falling home prices, tight lending conditions and a weak economy.
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.
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.