Real Estate

Valley hit hard by falloff in home sales, prices

WASHINGTON — The slump in housing deepened in the final three months of last year with sales falling in 40 states and median home prices dropping in nearly half the metropolitan areas surveyed.

Formerly red-hot areas were among the hardest hit as the five-year housing boom cooled considerably in 2006.

While some economists said they believed the worst may be over for housing, others predicted more price declines to come until near-record levels of unsold homes are reduced.

The National Association of Realtors said the states with the biggest declines in sales from October through December compared with the same period in 2005 were: Nevada, down 36.1 percent; Florida, down 30.8 percent; Arizona, down 26.9 percent; and California, down 21.3 percent.

In Modesto, home sales declined by 36 percent in early 2007 compared to a year earlier, according to the Central Valley Association of Realtors.

As of Feb. 2, 151 homes had been sold in Modesto this year, compared with 239by that date in 2006.

The median price over the previous six months was $333,000 in 2007, down by $16,000.

Other Northern San Joaquin Valley cities had similar drops in both sales and median prices.

The numbers were especially stark in Riverbank, where 40 homes sold in early 2006 compared with 16 in early 2007, and Ceres-Keyes, where 12 homes had sold in 2007 as of Feb. 2, versus 60 a year earlier.

In all, the Realtors said, sales declined in 40 states, six states showed gains and one state, Utah, had no change in activity in the final three months of last year. There was not enough information from Idaho, New Hampshire and Vermont to make a comparison.

Nationally, sales declined by 10.1 percent in the fourth quarter compared with the same period a year ago. The national median price — the point where half sell for more and half sell forless — fell to $219,300, down 2.7 percent from the fourth quarter of 2005.

In all, median home prices fell in 49 percent of the 149 metropolitan areas surveyed, the largest percentage of areas showing price declines in the 27-year history of the Realtors' price survey.

A total of 73 metro areas had price declines from a year ago, while 71 areas had increases. Five metro areas reported no change.

The price declines were led byan 18 percent decline in the Sarasota-Bradenton-Venice area of Florida. The city with the biggest price gain was Atlantic City, N.J., where the median home price was up 25.9 percent in the fourth quarter.

David Lereah, chief economist for the Realtors, said he believed the report would represent the low point in the current housing slowdown.

"When we get the figures for the spring, I expect to see a discernible improvement in both sales and prices," he said.

But Mark Zandi, chief economist for Moody's, predicted that home prices in many parts of the country would continue to be under pressure for the rest of this year as the market works through still large inventories of unsold homes.

He said this process will be made more difficult with banks raising lending standards because of concerns about rising mortgage default rates.

"We are seeing the declines concentrated in the industrial Midwest, where the job market is a mess due to the layoffs in the auto industry, and in markets such as Florida and California" where a heavy influx of speculators had bid up prices, Zandi said.

Before 2006, housing enjoyed a lengthy boom with sales of both new and existing homes setting records for five consecutive years.

Buyers were attracted by the lowest mortgage rates in more than four decades.

But big declines in sales and construction last year turned housing from one of the economy's stars to a major drag, which subtracted more than a percentage point from overall growth in the third and fourth quarters.

Associated Press writer Natasha Metzler and Bee staff writer Ben van der Meer contributed to this report.