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Existing Home Sales Crater In September

Sales plunged 8 percent as subprime meltdown worsened

By Mark Huffman
ConsumerAffairs.com

October 24, 2007

In its monthly report, the NAR said sales of existing homes and apartments dropped to a seasonally adjusted rate of 5.04 million units in September from 5.48 million in August. Compared to results from September 2006, home sales were down a shocking 19.1 percent.

Economists were expecting the number to be bad, but not this bad.

Lawrence Yun, NAR senior economist, said the decline is understandable.

“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,” he said. “The good news is that mortgage availability has markedly improved in recent weeks with interest rates on jumbo loans falling, and more people are applying for safer and conforming FHA mortgage products.

"Some of the cancelled transactions will move forward as buyers apply for other loans,” he said.

The national median existing-home price for all housing types was $211,700 in September, down 4.2 percent from September 2006 when the median was $220,900; this follows three months of stability in comparing with year-ago prices. The median is a typical market price where half of the homes sold for more and half sold for less.

“Because there were fewer transactions at the upper end of the market, there is a downward distortion reflected in a lower national median home price," Yun said. "Home prices continue to trend up in the Northeast and in the condo sector. In other areas not dependent on jumbo loans, such as much of the Midwest, prices are rising.”

Total housing inventory rose 0.4 percent at the end of September to 4.40 million existing homes available for sale, which represents a 10.5-month supply at the current sales pace, up from a downwardly revised 9.6-month supply in August.

“It appears raw inventories are stabilizing, but the housing supply is a bit inflated now because the sales pace does not reflect underlying market conditions – sales were dampened by the mortgage cancellations,” Yun said.

“Once the pent-up demand begins to move, we’ll see housing supplies begin to ease and then prices will edge up,” he predicted.

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