NAR: New Home Prices to Fall

From Bloomberg:

New-House Prices Will Fall for First Time in 15 Years

U.S. new-house prices will fall this year for the first time since 1991 and existing homes will have the smallest gain ever as a glut of properties forces sellers to accept lower offers, the National Association of Realtors said.

The U.S. median price for a new home probably will dip 0.2 percent to $240,500, the first decline since a drop of 2.4 percent 15 years ago, according to the NAR. The price for previously owned homes likely will rise 1.6 percent to $223,000, the smallest gain on record, the trade group said in a statement issued from its Washington office.

The inventory of new and existing homes for sale has swelled to record levels as the five-year U.S. housing boom comes to an end. An index of homebuilders including industry leaders D.R. Horton Inc. and Pulte Homes Corp. has plummeted 26 percent this year, after gaining 147 percent in the prior three years, as investors worry about home-price reversals.

“Even if we see prices reverse by a few percentage points, it’s not the end of the world because we’ve seen record increases in the last few years,” said Michael Darda, chief economist of MKM Partners LP in Greenwich, Connecticut. “The vast majority of homeowners have locked in huge gains that are not going to be erased.”
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Sales of previously owned homes probably will drop 8.9 percent this year to 6.45 million, which would be the third highest year after consecutive records in 2004 and 2005, NAR said in the report. New-home sales probably will plunge 17.3 percent to 1.06 million, the fourth highest level, according to the forecast.

Buyers have a “wait and see attitude” because they want to take advantage of price declines, David Berson, chief economist of the trade group, said in the forecast.
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Federal Reserve officials were concerned at their Sept. 20 meeting that the housing slump would grow worse, records of their last meeting showed. The Fed kept the U.S. benchmark rate unchanged for the second consecutive meeting, citing the “cooling” demand for housing.

“A range of indicators suggested that housing market activity was likely to slow further in the near term,” said the minutes of that meeting, released by the Fed today.