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David Duprey, Associated Press
A for-sale sign outside a home in Clarence, N.Y., advertises a reduced a price. Sales of existing homes fell for the fifth consecutive month in August as the once-booming housing market continued to slow.
The Associated Press
WASHINGTON -- Year-over-year existing home prices declined in August for the first time in more than a decade as sales fell for a fifth straight month.
The drop in median sales prices represented a dramatic turnaround in fortunes for the once high-flying housing market, which last year still was posting double-digit price gains amid concerns that higher interest rates would soon cool things down.
"Pop goes the housing bubble," Joel Naroff, chief economist at Naroff Economic Advisors, said yesterday after the National Association of Realtors released its monthly report. He predicted prices will tumble farther as home sellers struggle with a record glut of unsold homes.
The Realtors association said that sales of existing single-family homes and condominiums dropped 0.5 percent last month to a seasonally adjusted annual rate of 6.30 million units -- the fifth straight monthly decline, leaving sales 12.6 percent below the year-ago pace.
Chart: Sales of existing homes in milliions of unitsThe slowdown in sales meant that the inventory of unsold homes rose to a record 3.92 million units at the end of August. At last month's sales pace, it would take 7.5 months to clear out the backlog of unsold homes, the longest stretch since April 1993.
The median price of a home sold last month also fell, to $225,000, down 2.2 percent from July and, more telling, down 1.7 percent from August 2005, marking the first year-over-year drop in home prices since a 0.1 percent fall in April 1995. Last year, when the five-year housing boom was reaching its peak, median prices posted a string of double-digit gains on a year-over-year basis. The median price is the point where half the homes sell for more and half for less.
By region of the country, sales of single-family homes and condominiums in the South fell by 0.8 percent in August compared with July and were off 2.3 percent in the West. Sales rose by 1.9 percent in the Northeast and 0.7 percent in the Midwest.
Median prices were down in all regions of the country except the West, where the median price rose by 0.3 percent from a year ago.
On a brighter note, the drop in existing home sales in August was not as steep as expected, and some said the recent declines in mortgage rates may help keep the housing market from falling off a cliff. Bolstered by the lowest mortgage rates in more than four decades, housing set sales records for both new and existing homes for five consecutive years through 2005. This year, analysts are forecasting that sales are likely to fall by 10 percent.
David Lereah, chief economist for the Realtors, predicted price declines also would continue for the rest of this year as sellers adjust asking prices downward in light of the inventory glut. "This is the price correction we've been expecting," Mr. Lereah said. "With sales stabilizing, we should go back to positive price growth early next year."
First Published: September 26, 2006, 4:00 a.m.
