Noelle Knox
USA Today
With so many For Sale signs hanging in front yards, home prices — which posted a record 3.5% drop last month — are likely to fall through the end of the year, the National Association of Realtors said Tuesday.
The median existing home price fell in October for the third month in the row to $221,000 as more sellers were forced to lower their asking prices. Those price cuts, coupled with a dip in mortgage rates, appear to be making a difference as home sales ended a six-month losing streak and unexpectedly edged up 0.5% in October.
With a 7.4-month supply of homes for sale, “sellers will have to overcome their state of denial and start dropping prices even more to clear this market,” says Joel Naroff, chief economist of Naroff Economic Advisors. “And once that happens, we will then have to convince buyers that prices have stopped falling. We are a long way from that point.”
Buyers were more interested in buying single-family homes than condos last month.
The median price for an existing, single-family home was $221,300, down 3.4% from October last year. Sales of existing single-family homes rose 1.3% from September, but were down 11% from October last year.
Condo owners felt even pain as the median price skidded 5.3% to $214,300. Sales dropped 4.8% from September and 14.5% below October a year ago.
There may be a silver lining: the faster the price declines, the faster the correction will be over.
“We do not believe that housing has yet hit bottom, but the steepest declines are probably behind us,” says Nigel Gault, chief U.S. economist for Global Insight.
The hardest hit last month were homeowners in the South, where the median price plunged 7% to $185,000 from a spike in October. Home sales slipped 1.2% from September to October, and were 8.8% below a year ago.
In the Northeast, prices skidded 5.2% to $254,000. Sales declined 2.9% from September, and were 9.8% off from October last year.
The median price in the Midwest was $170,000, a dip of 1.2% below October last year. Sales were flat, but off 10.2% compared with October last year.
The median price in the West was $340,000, down 0.6% from October 2005. Sales rose 6.4% from September to October, but were 18.9% lower than a year earlier.
Lower mortgage rates might help explain part of the bounce. The average interest rate on a 30-year, fixed-rate loan fell to 6.36% from 6.4% in September.
