Source : The Business Times, February 26, 2008
Median price down 4.6%, the fifth consecutive month of decline
Sales of existing US homes fell to the lowest level in nearly a decade in January while the median price for a home dropped for the fifth straight month.
The National Association of Realtors said yesterday that sales of single-family homes and condominiums dropped by 0.4 per cent last month to a seasonally adjusted annual rate of 4.89 million units, the slowest sales pace on records going back to 1999.
Economists polled by Reuters were expecting home resales to fall to a 4.80 million-unit pace from the 4.89 million-unit rate initially reported for December. The December sales pace was revised to a 4.91 million unit rate.
'The report wasn't that much different than expectations. The disturbing thing is that we are still looking at a lot of supply on the market and it will take a long time to clear that up. The implication is that prices will continue to decline,' said Scott Brown, chief economist, at Raymond James & Associates in St Petersburg, Florida.
The median price of a home sold in January slid to US$201,100, a drop of 4.6 per cent from a year ago.
The drop in sales and the fifth consecutive decline in prices underscored the continued pressure facing housing, which is struggling to emerge from its worst slump in a quarter-century.
Sales were weak in all parts of the US except the Midwest, where sales posted an increase of 3.4 per cent. Sales dropped by 3.6 per cent in the North-east, 2.1 per cent in the West and 0.5 per cent in the South.
Sales of both existing homes and new homes tumbled for a second straight year in 2007 as the housing industry was battered by a severe credit crunch that hit in August as major financial institutions began reporting multibillion-dollar losses on their investments in risky sub-prime mortgages, loans made to homeowners with weak credit.
The market for sub- prime mortgages has essentially dried up and other types of loans have become harder to obtain as lenders have tightened their standards.
Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out with a rebound expected to start toward the end of this year.
'Sub-prime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales,' he said.
He said he expected demand to be bolstered in coming months by the action of Congress in the economic stimulus bill to raise the caps on the size of loans that can be backed by Fannie Mae and Freddie Mac and the Federal Housing Administration.
The slump in housing that began in 2006 followed a boom period in which sales and prices had soared to record levels. Many economists believe that the sharp turnaround has severely depressed US economic growth and boosted the odds that the country could fall into a full-blown recession. -- AP, Reuters
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