Daily News

MBA Urges Regulators To Avoid Invoking Suitability Standards
The Mortgage Bankers Association (MBA) recently made a preemptive strike against what it obviously perceives as the next threat against the mortgage industry - "suitability standards." Read more...

 

Home sales and prices continue to fall

By Justin Hunter

The real estate and housing market has continued to show signs of a major correction since the beginning of 2006. Sales and mortgage originations began to drop as interest rates continued to rise, but since the end of June, interest rates have been slowly declining.

Although the median home price in the U.S. continued to rise this year, it did so at a much, much slower pace than in previous years. Economists knew it would take time for prices to actually decrease. Well, the wait is over as the past coupe of months has produced price declines.

The article, “Existing-home sales, prices slide,” posted on Inman News October 25, 2006, provides potentially good or bad news about the current real estate market, depending on whether you are a buyer or seller.

‘The rate of existing-home sales fell for the sixth straight month in September and the median existing-home price dropped 2.2 percent in September compared to September 2005, the National Association of Realtors (NAR) trade group reported today.”

The 2.2 percent price decrease may not seem significant but it is considering the steady rate on inflation and the fact that year-over-year price declines hadn’t been recorded since 1995 until this year.

“The seasonally adjusted annual rate of home sales fell to 6.18 million in September, which was 1.9 percent lower than the August rate and 14.2 percent below the September 2005 rate. The September 2005 rate was the third-strongest month on record.”

The seasonally adjusted annual rate is a projection of one month’s sales total throughout a 12-month period, and then is adjusted to include seasonal fluctuations in sales activity.

“An estimated 3.75 million existing homes were available for sale at the end of September, which represents a 7.3-month supply at the current sales pace. The inventory of existing homes grew 35.1 percent in September compared to September 2005, while the 7.3-month supply in September represents a 58.7 percent increase over the September 2005 supply.”

The median existing home price for September 2006 was $220,000, which is $5,000 less than the $225,000 mark in September 2005.

What is interesting is how home sales and prices stacked up regionally. Existing home sales actually rose 0.4 percent in the South from August but recorded a 9.0 percent decline from September 2005.

While the median home price decline 1.6 percent ($184,000) in the South from last year, according to the NAR report.

“Existing-home sales in the Midwest eased 2.8 percent in September to a level of 1.39 million, and were 13.7 percent lower than a year ago. The median price in the Midwest was $169,000, which is 2.3 percent below September 2005.”

Also, according to the NAR report, home sales in the West dropped 3.1 percent to an annual pace of 1.25 million in September and were 23.8 percent lower than September 2005. The median price in the West was $332,000, which is a 4.3 percent year-over-year decrease.

“Existing-home sales in the Northeast fell 3.7 percent to a level of 1.03 million in September, and were 13.4 percent below September 2005. The median existing-home price in the Northeast was $259,000, down 5.1 percent from a year earlier.”

But the market may rebound sooner than expected largely due to the strong economy, lowering home prices and sales increases. Sales are expected to increase by the beginning of 2007 because of the low asking prices.

“David Lereah, NAR's chief economist, said in a statement, ‘Considering that existing-home sales are based on closed transactions, this is a lagging indicator and the worst is behind us as far as a market correction -- this is likely the trough for sales. When consumers recognize that home sales are stabilizing, we'll see the buyers who've been on the sidelines get back into the market, and sales will be at more normal levels in the wake of the unsustainable boom that we saw last year.’”

Back to Articles