Existing home sales hit a record low in October while the average home price fell as lenders continued to shift into less risky mortgages.
Existing home sales nationwide last month fell to a seasonally adjusted rate of 4.97 million units, down 1.2 percent from 5.03 million units in September, and 20.7 percent below 6.27 million units sold in September of 2006, according to data released by the National Association of Realtors. The volume was the lowest reported since the NAR began keeping the data in 1999.
“The industry is a cyclical industry,” said Michael Anikeeff, chair of the Edward St. John Department of Real Estate at Johns Hopkins University?s Carey Business School. “It shouldn?t shock us thatwe go through different cycles. Unfortunately we?re seeing a little more downside than in the past.”
NAR officials said they expected the sluggish performance.
“Temporary mortgage problems were peaking back in August when many of the sales closed in October were being negotiated,” said Lawrence Yun, chief economist for the association. “We continue to see the biggest impact in high-cost markets that rely on jumbo loans.”
The national median existing home price for all housing fell to $207,800 last month, down 5.1 percent from $218,900 during October 2006, according to NAR data.
But a decrease in home prices doesn?t mean a boom in sales, Anikeeff said. A hot market with rising values would prompt individuals to buy before prices top out, he said, while few would jump into a slow market.
“The people selling are those people who are forced to sell, everyone else is holding on, so they?re going to sell it for less,” he said.
Yun said lenders have continued to move away from subprime and exotic mortgages, but all forms of lending have been scaled back, said Matt Chambers, assistant professor of economics at Towson University.
“A lot of the low down-payment programs aren?t being offered anymore,” he said.
Anikeeff said it might take until 2009 for home prices to start rising again, but Chambers said he didn?t think a complete market crash was in the making.
“This boom was once-in-a-generation kind of a boom. … The doomsday thought of a crash isn?t going to happen,” Chambers said. “[But] I don?t really see anything that?s going to cause this to turn around real quick.”
