Median home price dips for first time since '95
Nervous home sellers finally threw in the toweland the kitchen sinklast month, lowering the prices they'll accept to sell their houses, the first time they've done so in 11 years.
Sales prices for existing homes fell by 1.7 percent from the year-ago period to $225,000, according to data released today by the National Association of Realtors. That's the biggest percentage decline since the fall of 1990, when the country was falling into a nasty recession and the housing market was reeling from a savings-and-loan scandal.
Total sales of existing homes also fell by half a percent in August to a seasonally adjusted rate of 6.30 million homes. The inventory of unsold homes rose to 3.92 million units, a more-than-seven-month supply at current sales rates.
Yet the drop in sales was somewhat less than economists had expected, and the price decline was even welcomed by some as a sign that sellers are finally becoming more realistic about what they can get for their homes.
Lower prices are "the only way to get things back to some sort of equilibrium," says David Lereah, NAR's chief economist, who expects prices to continue to fall through the end of the year.
Lereah, whose 2005 book Why the Real Estate Boom Will Not Bust predicted that home prices would continue to rise through the end of the decade, said he still believes the housing market will experience what he termed a "soft landing," with sales having bottomed out over the past summer and prices rising again early next year as inventories decline.
Others aren't so sure, however.
"We're only about halfway through the correction," says Mark Zandi, chief economist at Moody's Economy.com, who notes that house prices remain at historicand unaffordablehighs in many parts of the country. "The most likely outlook is continued declines in sales, construction, and house prices through this time next year, and then the market will be flat for another year after that. And it won't be until 2008 before we see any measurable pickup in activity."