Home Sales Hit Slowest Pace in 4 Years

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WASHINGTON — Reflecting further housing troubles, sales of existing homes fell in May to the lowest level in four years while the median home price dropped for a record 10th consecutive month.
The National Association of Realtors reported Monday that sales of existing single-family homes and condominiums dropped 0.3 percent in May to an annual rate of 5.99 million units, the slowest sales pace since June of 2003.
The median price

WASHINGTON — Reflecting further housing troubles, sales of existing homes fell in May to the lowest level in four years while the median home price dropped for a record 10th consecutive month.

The National Association of Realtors reported Monday that sales of existing single-family homes and condominiums dropped 0.3 percent in May to an annual rate of 5.99 million units, the slowest sales pace since June of 2003.

The median price of a home sold last month dropped to $223,700, down 2.1 percent from a year ago. It marked the 10th straight price decline compared with a year ago, the longest stretch of weakness on record.

The median price is the midpoint -- half of homes sold for more, half for less.

The inventory of homes for sale rose 5.0 percent to 4.43 million units at the end of May which represents a 8.9 months' supply at the current sales pace. That is the highest months' supply since June 1992, although the 1992 figure only includes single-family homes while the current data also includes condos.

The sales decline reflected weakness in the South, where sales dropped 3.4 percent, and the West, where sales were down 0.8 percent.

Sales actually showed strength in the Northeast, rising 5.8 percent, and the Midwest, where they were up 0.7 percent.

Analysts said housing is being hurt by high inventories and the continued crisis in subprime mortgages, which has caused lenders to tighten their standards, making it harder for potential buyers to qualify for loans.

They said all of the housing troubles seem to be causing a crisis in confidence, making people delay decisions to buy homes.

"I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers," said Lawrence Yun, senior economist with the Realtors.

"Household formation has slowed dramatically since late 2006, implying that many people are doubling-up," adding roommates or moving in with parents, he said.

The current slump in housing is the worst since the 1989-92 downturn. It comes after a prolonged boom that saw sales of new and existing homes set records for five consecutive years.

Analysts believe that the median home price will continue falling until builders cut back on production of homes coming on the market.

The Realtors are predicting that the median home price will decline 1.3 percent this year while sales are forecast to drop 4.6 percent. It would be the first annual price decline in four decades of record-keeping.

Another potential problem is mortgage rates, which have been rising in recent weeks although they still remain below their historical averages.

According to Freddie Mac, the average rate for 30-year mortgages was 6.26 percent in May, up from 6.18 percent in April.

Contributing: Reuters

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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