Prices of U.S. existing homes suffered a record drop in August and the rate of sales tumbled, offering little sign of improvement in the source of the financial crisis in the United States.
The pace of existing home sales decreased 2.2 percent to an annual pace of 4.91 million units while the median national home price declined a record 9.5 percent to $203,100, the National Association of Realtors said on Wednesday.
In what would normally be a potentially bright spot, the overstock of homes for sale shrank. However, the trade group said as many as 2 in 5 home sales were by borrowers who have seen their property lose value or are facing foreclosure.
“The NAR estimates that 35-to-40 percent of all sales are of distressed property, so underlying private activity is weaker than the headlines (imply) and there is little sign of imminent improvement,” Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Economists polled by Reuters were expecting home resales to fall to a 4.93 million-unit pace from the 5.00 million unit rate initially reported for July, which was revised to a 5.02 million unit pace.
The inventory of existing homes for sale fell 7.0 percent to 4.26 million from the record-high overstock reported in July.
From the AP:
A record decline in U.S. home prices in August attracted more buyers in some areas and led to a sizable decline in the number of unsold homes on the market, the National Association of Realtors said Wednesday.
The median price fell 9.5 percent to $203,100, the largest price decline on records dating to 1999. As prices fall, buyers are taking advantage of steep discounts, especially in hard-hit markets like California, Nevada and Florida.
“Time and price are the real cures for the housing market slump,” said Mike Larson, an analyst at Weiss Research.
The inventory of unsold homes fell 7 percent to 4.3 million, down from the all-time record of 4.6 million in July. That’s a 10.4-month supply at the current sales pace.
The decline, however, merits only “a small round of applause” because around 5 months of inventory is a more typical level, wrote Global Insight economist Patrick Newport. Also, many homeowners who don’t have to sell are likely keeping their properties off the market. At the same time, thousands of foreclosed properties are tied up in court and are not for sale yet.
Lawrence Yun, the trade group’s chief economist, said he hopes the downward trend in inventories continues because, “home prices will not stabilize as long as inventories remain high.”
Inventories have been driven higher by a massive wave of mortgage foreclosures, especially on risky loans.