RepossessedHomeSales.com

Drop In Home Sales Puts Pressure On Prices

Written by Lois D. Fernandes    Wednesday, 29 April 2009

Home sales posted an unexpectedly sharp drop last month to the lowest level since January 2004, and home prices fell in all regions of the country but the South, the National Association of Realtors said Wednesday. The downward pressure on home prices will probably continue through the beginning of 2007 because the inventory of homes for sale has surged to the highest level in 13 years. A record 3.86 million homes are for sale, a 7.3 month supply. The weakness in the market is being driven by higher interest rates, low affordability and speculators who are dumping investment properties because they couldn't flip them for a profit. "I was disappointed. It was a lot lower than I anticipated," said David Lereah, NAR's chief economist. "What is clear to me is sellers are more stubborn than I expected them to be. We definitely need a correction in prices in order for buyers to come back into the market." He expects home prices to fall 5% nationally. He also cautioned that a few cities in Florida and California, where home prices soared to nosebleed heights, could have "hard landings." Total existing home sales declined 4.1% from June to a seasonally adjusted pace of 6.33 million. That's down 11.2% from July last year. The median single family home price, meaning half cost more and half cost less, was $231,200, up 1.5% from July last year, but the median condo price fell for the second month in a row and is now $225,600, down 1%. What is most worrisome, however, is how the real estate markets are suffering in Michigan, Ohio, Indiana, Massachusetts and some parts of Pennsylvania and New York. Job losses in those areas are pushing home sales and prices down, and foreclosures up. "That's a whole different situation for real estate. That's not a softening; that's a contraction," Lereah said. "That worries me more than anything else. It highlights the need for the (Federal Reserve) to stay the course and not raise rates. The economy is a little softer than everybody thought." Earlier this month, the Fed voted not to raise its target for short term interest rates again but signaled that its pause may be temporary if inflation doesn't slow down. Some economists, such as Roger Kubarych of HVB group, said the report strengthened the hand of Fed members arguing against further rate increases. Wednesday's disappointing results for existing home sales comes a day after Toll Bros., one of the nation's largest builders of new homes, said orders have dropped 48% in its most recent quarter. The Commerce Department reports today on July new home sales.

Last Updated ( Wednesday, 29 April 2009 )