Home Sales, Prices Drop; Inventory at 23-Year High

Sales of existing homes in the United States dropped slightly in April, prices fell sharply, and the inventory of single-family homes hit a 23-year high, offering little hope of an imminent turnaround in the housing market.

The inventory numbers were a "disappointment," said Michael Larson, a housing analyst with Weiss Research in Jupiter, Fla. "There's a lot of houses for sale out there that are sitting on the market or sitting empty. . . . Prices are going to have to continue to fall."

The National Association of Realtors reported yesterday that existing-home sales, which includes single-family houses, condominiums, townhouses and co-ops, dropped at an annual rate of 1 percent from March to April, to 4.89 million units. Analysts said the figure was a little better than expected.

"It's actually not as bad as we feared," said Charles McMillion, president of MBG Information Services in the District.

Still, the decline in home sales matched the all-time low set in January and was the eighth time in nine months that sales dropped.

The median price in April of an existing home fell 8 percent from the corresponding period a year ago, to $202,300, and inventories of single-family homes climbed to a 10.7 month supply at the current sales pace. About six months of inventory is considered healthy for the market.

The National Association of Realtors attributed some of the bad news to restrictive lending. The trade group predicted that sales would rise in the second half of the year because of changes to policies of Fannie Mae and Freddie Mac that will make mortgages backed by the government-chartered agencies available to a wider set of buyers.

"This means consumers across the country will have access to safe, affordable financing with down payments of only 5 percent on most mortgages, with 100 percent financing available on some loan products, and we could see an upturn in some sales this summer," Richard F. Gaylord, the group's president, said in a statement.

But analysts said the changes in financing would help only so much.

"The fact of the matter is all those things will help some borrowers and some buyers and help cushion the downturn somewhat," Larson said. "Let's not kid ourselves. There isn't a magic bullet that is going to solve this problem."

Lawrence Yun, chief economist for the realtors' association, said inventories would likely go from "uncomfortably high" to "manageably high" in 2009. "High inventory will continue to pressure prices to come down," he said. "Broadly speaking, inventory is high and sellers need to come down on the prices."

There were slivers of good news. While existing homes sales declined from the previous month in most parts of the country, they were up 6.4 percent in the West. Analysts attributed the uptick in that region to steep price declines and aggressive sellers.

Sales fell the most in the Midwest, 6 percent, followed by a 4.4 percent decline in the Northeast. In the South, which includes the Washington area, sales were unchanged.

Yun said sales and prices not only vary in different markets, but also from neighborhood to neighborhood, sometimes based on the proportion of subprime loans.

McMillion said the market conditions do not bode well. "The unsold inventory, together with a steep drop in prices, is a very strong indication this problem, which took many years to build, could last two or three more years."