Existing-Home Sales Fall Steeply
Wednesday, April 25, 2007
Growing problems in the mortgage industry combined with bad weather in some parts of the country to fuel the steepest one-month decline in sales of existing homes in nearly two decades, the National Association of Realtors reported yesterday.
Sales of previously owned homes in March fell 8.4 percent from February, the group reported. It was the largest one-month drop since sales plummeted 12.6 percent in January 1989, when the country was in a housing recession. It was also 11.3 percent below the number of units sold in March 2006.
The drop -- from a seasonally adjusted rate of 6.68 million homes sold in February to 6.12 million in March -- followed three consecutive months of increases in sales of existing single-family houses, townhouses, condominiums and co-ops. Those gains had led to speculation that the market was coming back after a sluggish 2006.
David Lereah, chief economist for the Realtors group, attributed the downturn partly to bad weather in parts of the country in February that carried over to transactions closed in March.
But more troubling are the problems in the subprime mortgage industry, he said. During the housing boom, lenders gave non-traditional loans to many of those borrowers, who typically have blemished credit records. Now that delinquencies and foreclosures are on the rise, lenders are tightening their standards.
The median home price also fell year over year for the eighth straight month, the longest stretch of falling prices on record. The median price, which is the point at which half the prices are higher and half are lower, fell to $217,000 in March, from $217,600 in March 2006.
The association forecasts that the median home price will drop about 1.1 percent for all of 2007, which would be the first year-long decline on record.
Lereah said that he originally expected the housing market to recover by this quarter but that he now believes it won't happen until summer. A full recovery, he said, will take place in 2008. "I expect a couple of more sluggish months coming," he said.
Others questioned that assessment. "Every bottom call up until this month has been wrong," said Mike Larson, a real estate analyst at Weiss Research in Jupiter, Fla. "There's no evidence in the numbers yet that the market is bottoming."
Larson said prices will continue to drop until the supply of homes decreases. According to the Realtors group, total housing inventory fell 1.6 percent at the end of March, to 3.75 million existing homes available for sale. However, at the current sales pace, it would take 7.3 months to get through that supply, up from 6.8 months in February. A stable market usually has a 5.5-month to 6-month supply, experts say.
Sales tumbled in every part of the country. They fell 10.9 percent in the Midwest, 9.1 percent in the West and 8.2 percent in the Northeast. In the South, which includes the Washington region, sales dropped 6.2 percent.
Still, John McClain, a senior fellow at George Mason University's Center for Regional Analysis, said the Washington region will probably snap back more quickly because of a healthy local economy. "I think we're in the beginnings of a recovery in this market," he said, "but I don't think we'll see it for a few months."