Existing-Home Sales Slide
Thursday, January 26, 2006
Sales of previously owned homes slowed for the third straight month in December, while prices continued to slip from the summer's all-time highs, according to figures released yesterday by the National Association of Realtors.
The 5.7 percent drop in the sale of existing houses, townhouses and condos to an annual pace of 6.6 million units was steeper than many analysts had predicted and was the first time since March that it had fallen below 7 million. Peter Morici, an economist and business professor at the University of Maryland, had predicted the December sales figure would be 6.9 million units.
"Wow," he said when he was told of the 6.6 million figure. "Mortgage rates dipped a little in December, so I thought we were going to get a little bit of help from that. . . . The housing bubble is pretty much over. We are in for an adjustment. The question is not will prices fall, because they have been falling, but how much prices will fall."
Existing-home sales were down 3.1 percent compared with December 2004, the trade group said. The biggest decline, 11.4 percent, was in the West. The South, which includes the Washington market, was up 1.2 percent from last December but down 7.2 percent from November.
Real estate groups in the Washington area have also reported declines to varying degrees. The Northern Virginia Association of Realtors, for example, said December sales were down about 24 percent from December 2004 in an area that includes Alexandria, Arlington and Fairfax counties. In Loudoun and Prince William counties, sales were down roughly 14 percent. Prince George's County sales fell about 5 percent.
Candy Clanton, an associate broker in Fairfax, has seen just how much the landscape has changed over the past several months. She listed a four-bedroom house in Woodbridge -- with new siding, windows and driveway as well as a renovated kitchen -- for just under $350,000. It was among the least expensive in the neighborhood, Clanton said, but last week, after three months, her client took it off the market. "I think the buyers who do have money . . . are all waiting to see what is going on," she said. "My phones are not ringing and my houses are not selling."
Nonetheless, the national real estate group reported, 7.07 million existing homes sold in all of 2005, setting a record for the fifth year in a row. The total was up 4.2 percent from 2004.
David Lereah, the association's chief economist, said the December decline was not a surprise. Home sales activity, he said, is now at a "sustainable level and is likely to pick up a bit in the months ahead."
But don't expect 2006 to break any records, economists said. While sales typically strengthen in the spring, Morici said he expects the median price of homes sold nationally to decline by about $10,000 this year.
The national median existing home price -- the point in which half the homes are more expensive and half cheaper -- hit a high of $220,000 in August but dipped to $211,000 by December. For all of 2005, the median sales price was $208,700, up from $185,200 in 2004.
In a report yesterday, Goldman Sachs Group Inc. said the December figures suggest that "housing market conditions are deteriorating rapidly."
The $7,000 drop in median home price from October to December, Goldman Sachs said, is the largest two-month drop in prices in years and must be taken seriously as a "potential sign of a sharper-than-expected weakening in the U.S. housing market."