WASHINGTON – Existing home sales fell last month nationwide and in the Northeast, both year-over-year and compared with July, although they remained above their lows earlier this year, according to a report today by the National Association of Realtors.
U.S. sales of existing single-family houses, townhouses, condominiums and co-op units fell to a seasonally adjusted annual rate of 4.91 million units per year, the NAR said. That represented a 10.7-percent decline from August 2007’s sales pace of 5.50 million per year, and a 2.2-percent decline from the revised July pace of 5.02 million units per year, or 20,000 higher than previously thought. (READ MORE)
The month-over-month decline was nearly twice as sharp as expected, based on the median forecast from a Bloomberg News survey of 73 economists. Analysts had expected an existing-home sales rate of 4.94 million units per year – or 1.2 percent below July’s 5.02 million units per year – that would have matched the average pace in the year’s first seven months, the survey found. (Their estimates of the August “resale” pace ranged from 4.7 million to 5.15 million units per year.)
Yet the sales pace nationwide remained above June’s 17-year low of 4.85 million units per year.
The nation’s inventory of existing homes shrank to 4.25 million units for sale at the end of August, a decline of 2.9 percent from a year ago 7.0 percent from this July. At the current pace of sales, that represented a 10.4-month supply, a decline of 4.6 percent from the preceding month’s 10.9-month supply but an increase of 8.3 percent from August 2007’s 9.6-month supply.
“August sales reflect higher interest rates before the government takeover of Freddie Mac and Fannie Mae,” Lawrence Yun, the NAR’s chief economist, said in a statement.
“The sudden drop in mortgage interest rates over the past couple weeks is improving housing affordability,” he continued. “With higher loan limits and a beefing up of the FHA program, all the mechanisms have been falling into place to increase mortgage availability.
“However, home sales will be constrained without a freer flow of credit into the mortgage market,” Yun said. “The faster that happens, the sooner we’ll see a broad stabilization in home prices that in turn will help the economy recover. Historically, housing has led the nation out of economic doldrums – there will not be an economic recovery without a housing recovery.”
The median price of existing homes sold last month nationwide fell to $203,100 – a 9.5-percent decline from the year-ago median of $224,400 and a 3.4-percent decline from July’s $210,300 – although it remained above the $195,600-to-$201,200 range of the first four months of 2008.
That lower price “reflects more transactions related to subprime loans,” Yun said. “Fewer than 10 percent of homeowners have subprime loans, but these mortgages are accounting for a disproportionately high share of sales in the current market.”
Single-family sales nationwide “slipped 1.4 percent to a seasonally adjusted annual rate of 4.35 million in August from an upwardly revised pace of 4.41 million in July, but are 9.6 percent below the 4.81 million-unit level a year ago,” the NAR said. Their median price fell to $201,900, a 9.7-percent decline from a year ago.
Sales of existing condominium and co-op units “dropped 8.2 percent to a seasonally adjusted annual rate of 560,000 units in August from an upwardly revised level of 610,000 in July, and are 19.0 percent below the 691,000-unit pace” a year ago, the trade group added. Their median price last month was 212,600, or 7.2 percent below a year ago.
In the Northeast, sales of existing homes fell to an annual rate of 850,000. That represented a decline of 15.0 percent from the August 2007 rate of 1.00 million units per year and 6.6 percent from July’s 910,000-unit annual pace, although it remained above the region’s January sales pace of 800,000 units per year.
Month-over-month sales declines also were seen in the West (-5.3 percent), although sales edged up last month in the South (+0.5 percent) and) and the Midwest (+0.9 percent). Year-over-year declines were seen in every region but the West, where sales rose 4.9 percent.
Meanwhile, the median price of existing homes sold in the Northeast fell to $271,000, 3.9 percent less than in August 2007 and 2.6 percent less than in July. Prices also fell compared with a year ago in the West (-23.9 percent), the Midwest (-5.6 percent) and the South (-3.4 percent). “The highest concentration of foreclosures is in the West, which is weighing down the median price because many buyers are taking advantage of deeply discounted prices,” Yun said.
“The headwinds facing housing have intensified,” Peter Kretzmer, a senior economist at Bank of America Corp. in New York, told Bloomberg News before the NAR report. “Delinquencies and foreclosures continue to rise while credit conditions remain tight.”
NAR President Richard F. Gaylord, of RE/MAX Real Estate Specialists in Long Beach, Calif., said today that the mortgage pendulum already has swung too far. “The difficulty in obtaining a mortgage increased over past couple months, making it more challenging for creditworthy borrowers to find financing.”
A report due tomorrow from the U.S. Department of Commerce is expected to show that new single-family home sales nationwide dipped last month to an annual pace of 510,000 units, the Bloomberg survey found. That would represent a 0.97-percent decline from July’s 515,000 annual rate but a 1.39-percent increase from June’s 17-year low of 503,000 units per year.
“Our hope is that overly tight lending criteria can be loosened with reasonable standards and credit, so that sales activity can catch up with demand,” Gaylord said. “Interest rates have already declined. But there is a serious question as to whether a cash infusion by the U.S. Treasury into Wall Street would help consumers by improving mortgage funding.
“We urge Congress to restore access to sound mortgage credit so people have the ability to make and keep a long-term investment in the American dream of homeownership,” Gaylord added. “Congress needs to take care of Main Street and not just bail out Wall Street.”
The National Association of Realtors is the nation’s largest trade association, with more than 1.3 million members in all aspects of residential and commercial real estate. Additional information is available at www.realtor.org.
