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Home prices plunge as sales slow sharply

Sales of new and existing homes plummeted in November, as buyers stayed out of the market amid the growing financial crisis and deepening recession.
/ Source: staff and news service reports

Sales of new and existing homes plummeted in November, as buyers stayed out of the market amid the growing financial crisis and deepening recession, according to figures released Tuesday.

Sales of existing homes fell 8.6 percent, far more than expected, to an annual rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October. The median sales price fell 13.2 percent — the largest amount on record — to $181,300, from $208,000 a year ago.

That was the lowest price since February 2004 and the biggest year-over-year drop on records going back to 1968. The drop in home prices was probably the largest since the Great Depression, NAR chief economist Lawrence Yun told reporters.

Meanwhile sales of newly built single-family homes slowed to the weakest levels since 1991, according to the Commerce Department.

The seasonally adjusted annual sales pace of 407,000 was down 2.9 percent from October and was the lowest rate since January 1991.

The median price of a new home sold in November was $220,400, a drop of 11.5 percent from the sales price a year ago. That was the biggest year-over-year price decline since a 12.7 percent fall in March of this year. The median is the point where half the homes sold for more and half for less.

"The quickly deteriorating conditions in the job market, stock market, and consumer confidence in October and November have knocked down home sales to another level," said Yun, the Realtors' economist. "We hope the home sales impact from the stock market crash turns out to be short-lived, as was the case in 1987 and 2001."

Yun said prices are being pressured by the large number of "distress sales" from homes in foreclosure.

The price decline was most pronounced in the West, where the median price of $242,500 was more than 25 percent below year-ago levels. Sales activity, however, was up 18 percent from a year ago, indicating that low prices coupled with low mortgage rates are drawing some buyers off the sidelines.

In the Northeast, the median price of $257,700 was virtually flat from year ago. But sales activity was down a sharp 18 percent.

Total housing inventory at the end of November rose 0.1 percent to 4.20 million existing homes available for sale, which represents an 11.2-month supply at the current sales pace, up from a 10.3-month supply in October, according to the Realtors.

Sales activity and prices were down sharply from a year ago in the Midwest and South.

A separate index released by a government agency found that home prices in October were 7.5 percent below year-ago levels. That index, calculated by the Federal Housing Finance Agency, is based on resales of the same properties, although not all transactions are covered.

Prices were down 1.1 percent from September.