The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.
The weakness in sales translated into further pressure on prices. The median price — the point at which half the homes sold for more and half for less — fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.
The 8 percent decline in sales was bigger than the 4.5
percent decline that had been expected.
Analysts blamed the bigger-than-expected slump on the turmoil
that hit credit markets and mortgage markets in August as
worries increased over rising mortgage foreclosures.
Those worries resulted in a drying up of the availability of
so-called jumbo mortgages, loans over $417,000, which are
particularly important in high-cost areas such as California.
“Mortgage problems were peaking back in August when many of the
September closings were being negotiated and that slowed sales
notably in higher priced areas that rely more on jumbo loans,”
said Lawrence Yun, senior economist for the Realtors.
By region of the country sales were down 10 percent in the
Northeast, 9.9 percent in the West, 7 percent in the Midwest and
6 percent in the South.
The slowdown in sales meant that the inventory of unsold homes
rose to 4.4 million units in September. At the September sales
pace, it would 10.5 months to eliminate the overhang of unsold
homes, a record length of time.
Economists are worried that the huge levels of unsold existing
and new homes will put further downward pressure on prices.
Yun said that the price declines should be put into perspective
in that they are occurring after a five-year housing boom which
pushed prices up to record levels.
He forecast that prices will decline by about 1.5 percent this
year. That would be the first annual price decline on Realtors'
records going back four decades.
The troubles in housing have been a drag on overall economic
growth, increasing worries that the housing slump and related
credit market troubles could become so severe that they will
push the country into a recession.
However, many private economists believe that the Federal
Reserve, which cut a key interest rate for the first time in
four years last month, will continue cutting rates in a campaign
to make sure that the weakening economy does not tumble into a
full-blown recession.