Friday, Jul. 25, 2008

The slump in real state persists nationwide

U.S. home sales keep falling; California bucks trend as prices plunge

WASHINGTON -- Sales of existing homes tumbled more sharply than expected in June, pushing activity down to the lowest level in more than a decade.

With an already huge glut of homes on the market, median prices fell compared with a year ago and analysts predicted prices would keep falling until next spring as tighter credit, a slipping job market and rising foreclosures scare potential buyers away.

The National Association of Realtors reported Thursday that sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units, the slowest sales pace since the first quarter of 1998.

The decline was more than double the 1 percent drop economists had been expecting and left sales 15.5 percent below where they were a year ago.

The downward slide in sales depressed prices, too. The median price for a home sold in June dropped to $215,100, down by 6.1 percent from a year ago. That was the fifth- largest year-over-year price drop on record.

Inventories of homes on the market rose by 0.2 percent to 4.49 million units, meaning it would take 11.1 months to exhaust the current backlog at the June sales pace, the second-highest level in 24 years. The glut of unsold homes is being made worse by a rising wave of foreclosures.

The steeper-than-expected fall in home sales abruptly ended a stock rally driven by good earnings news. The major indexes fell about 2 percent, including the Dow Jones industrial average, which lost more than 280 points.

Sales of existing homes dropped in all regions of the country in June except in the West, which posted a 1 percent sales increase.

Sales fell by 6.6 percent in the Northeast, 3.4 percent in the Midwest and 3.1 percent in the South.

In the Northern San Joaquin Valley, prices continued to plunge, but sales picked up.

Stanislaus County's median price fell to $201,000 last month, down 6.5 percent from May and 41.4 percent from June 2007, according to the latest data from DataQuick Information Systems. The last time the figure was around $200,000 was in mid-2002, three years into a steep runup that would peak in 2005.

Stanislaus County had 817 home sales last month, up 57.4 percent from a year earlier, as buyers found relative bargains and foreclosed homes continued to flood the market, DataQuick reported.

In Merced County, the median price slipped to $160,000 last month, 44.8 percent less than a year earlier. The number of sales rose 63.1 percent. San Joaquin County's median was at $227,000 last month, down 42.8 percent from June 2007. The number of homes sold was up 74.3 percent.

Analysts said the slight sales rebound in the West reflected big price declines in many parts of California that are helping to make homes affordable once again.

"California is on the leading edge of a housing recovery, and that is because prices are falling fast in many areas and that is restoring affordability," said Mark Zandi, chief economist at Moody's Economy.com.

But he predicted any rebound nationally will be slow in coming, reflecting the continued surge in foreclosures as many subprime mortgages reset to higher rates.

"It will be a long and painful end to this downturn but at least we are beginning to see some signs of the end," Zandi said.

Many analysts said they expected sales would stop falling by the end of this year and prices would stabilize by next spring, although they said any significant rebound in prices could be years away.

Rescue package approved

Seeking to address the housing crisis, the House on Wednesday approved a sweeping rescue aimed at helping as many as 400,000 homeowners avoid foreclosure.

It also would bolster the stability of mortgage giants Fannie Mae and Freddie Mac by expanding the resources the federal government can extend to the two mortgage giants.

Lawrence Yun, chief economist for the Realtors Association, said a significant feature of the rescue package is a tax credit worth as much as $7,500 for first-time home buyers who purchase from April 9 of this year to July 1, 2009.

Yun estimated that as many as 3 million first-time home buyers could qualify for that tax break, providing a sizable boost to sales at a critical time.

Other private economists were not as optimistic, pointing to all the problems facing the economy right now, from rising layoffs to plunging consumer confidence and tighter lending standards that banks are imposing in the face of billions of dollars lost from bad mortgage loans.