Ahhh, The 80’s

24 04 2007

Bad weather and growing problems in the mortgage industry forced the steepest one-month decline in sales of existing homes in nearly two decades, dashing hopes that the housing market is headed for an imminent recovery, the National Association of Realtors reported today. Sales of previously owned homes in March fell by 8.4 percent compared with February, the group reported. It was the largest one-month drop since sales of existing homes plunged 12.6 percent in January 1989, the last time the country was in a housing recession. It was also 11.3 percent below the number of units sold in March 2006.

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The drop — from a seasonably adjusted rate of 6.68 million homes sold in February to 6.12 million in March — followed three consecutive months of increases in sales of existing single-family homes, townhouses, condos and co-ops.

David Lereah, chief economist for the realtors group, attributed the downturn partly to bad weather in February. Existing home sales are counted when the transaction is completed, and most of February’s sales would have closed in March.

Lereah said he had expected the housing market to recover by this quarter, but that problems with subprime mortgages will delay that until this summer. During the housing boom, lenders gave exotic loans to people with weak credit. Now that delinquencies and foreclosures are increasing, lenders are tightening their standards, at the behest of federal agencies.

“If you could take the subprime problems out of it, we were recovering,” he said. “I expect a couple of more sluggish months coming.”

The median home price also suffered for the eighth straight month, the longest stretch of falling prices on record. The median price fell to $217,000 in March, from $217,600 in March 2006.

Lereah said he’s projecting a 1.1 percent drop in the median price of homes for all of 2007, which would be the first annual decline on record. A full recovery won’t happen until 2008, he said.

“That’s the first time we’ve ever forecasted a drop,” he said.

Written by Nancy Trejos, Washington Post.

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