Sales of existing homes plummet
Analysts cautioned that tougher approval standards by lenders in response to the increase in mortgage delinquencies will depress sales further in coming months. They said a rebound in housing may not occur until 2008.
The National Association of Realtors reported Tuesday that sales of existing homes fell by 8.4 percent in March, the sharpest drop since a 12.6 percent plunge in January 1989.
The decline, which was three-times what had been expected, pushed sales down to a seasonally adjusted annual rate of 6.12 million units, the slowest pace in nearly three years.
The drop, which followed three straight months when sales had risen, was blamed in part on bad weather in February which depressed house hunting in much of the country after a string of warmer-than-normal months had pushed sales higher.
Existing home sales are not counted until the deal is closed though contracts signed in February do not get counted until March.
But analysts said the severity of the decline showed that factors other than weather played a part.
They said troubles in the subprime mortgage market, which supplied loans to borrowers with weak credit, was starting to have an impact on sales. Potential buyers are having more trouble getting loans as lenders tighten standards.
In addition, because of a rising number of mortgage delinquencies more homes are being dumped onto an already glutted market. RealtyTrac, which follows mortgage foreclosures, reported that foreclosures surged by 47 percent in March compared to a year ago.
The Realtors’ report said that with sales falling, the amount of time it would take to exhaust the existing inventory of unsold homes at the March sales pace rose to 7.3 months, 30 percent longer than a year ago.
The glut of unsold homes depressed prices further with the median home price dropping for a record eighth straight month to $217,000 in March, down 0.3 percent from the median sales price a year ago. The median is the point where half the homes sold for more and half for less.