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10/10/2007

Home Inventories at 18 - Year High



It may be discouraging to see For Sale signs planted in front yards for several months. For sellers, competitively pricing their property is key. And for buyers, the negotiating power is theirs. Home resales fell for a sixth straight month in August as tighter credit conditions for some borrowers kept some deals from getting off the ground, the National Association of Realtors reports. With sales of existing homes falling 4.3% to a five-year low seasonally adjusted annual rate of 5.50 million last month, inventories of unsold single-family homes hit an 18-year high.

Sales are down nearly 13% compared to one year ago and fell in all four regions: 2% in the Northeast, 9.8% in the West, 5.2% in the Midwest and 2.7% in the South.

Sales of single-family homes dropped 3.8% to a 4.81 million annual pace, the lowest since August 2002. Condo sales fell 8% to a 690,000 pace annualized, also a five-year low. Inventories of unsold existing homes on the market rose by 0.4% to 4.58 million, representing a 10-month supply at the August sales rate. For single-family homes alone, the inventory represents a 9.8-month supply, the most since May 1989. Inventory data are not seasonally adjusted, however.

"The credit-market freeze in August no doubt contributed to the decline in sales," said Lawrence Yun, senior economist for the real estate trade group. Many loans that had been committed to fell through, Yun said, so the sales couldn't close. Existing-home sales are measured at closing.

An informal survey of real estate brokers showed about 10% of jumbo loans were failing to close, Yun added.

The increase in inventories was driven mostly by lower sales, not by more supply hitting the market. In unadjusted terms, 596,000 homes were listed for sale for the first time in August, the fewest listings for any August in seven years, Yun said. In recent years, about 700,000 homes would be listed in a typical August.

Yun said he expected further sales declines in September, but noted that mortgages have become more affordable and more available since the worst days of August. The Federal Reserve cut interest rates in early September and Treasury yields, which influence mortgage rates, also eased.

The median sales price was $224,500, up 0.2% since August 2006. Single-family median prices were unchanged year-over-year at $223,900.

"Prices are still holding on," Yun said. The median price is affected by the mix of homes sold, so the bigger drop in the more-expensive West region could be masking actual price declines.

In a separate report, Standard & Poor's said the Case-Shiller home-price index for 20 major cities fell 3.9% compared with a year earlier. For the 10-city index, the 4.5% price drop in the past year is the biggest since 1991. The Case-Shiller index is not affected by the mix of homes sold, since it compares sales prices of the same homes over time.

Prices are down 9.7% in Detroit, 8.8% in Tampa, 7.8% in San Diego, 7.3% in Phoenix, 7.2% in Washington and 6.4% in Miami. Prices are up 6.9% in Seattle, 6% in Charlotte and 3.8% in Portland.

Rachel Koning Beals has written about credit, real estate, personal finance and investing for 12 years.





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