U.S. home prices fall to early 2004 levels

Sam Morris / File photo

This home near the intersection of Green Valley Parkway and Warm Springs Road in Henderson has been in foreclosure, as have thousands in the Las Vegas Valley.

Staff and wire reports

Monday, Nov. 24, 2008 | 12:16 p.m.

Nationwide sales of existing homes fell more than expected last month, as economic fears made buyers leery even though prices plunged to the lowest level in more than four years. And the decline is expected to get worse because October's results reflect sales contracts signed before Wall Street's nosedive.

The National Association of Realtors said Monday that sales of existing homes fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October, from a downwardly revised pace of 5.14 million in September. Sales had been expected to fall to a rate of 5.05 million, according to economists surveyed by Thomson Reuters.

The median sales price nationwide plunged 11.3 percent from a year ago to $183,000. That was the largest year-over-year drop on record going back to 1968, and the lowest median sales price since March 2004.

According to numbers released last week by Las Vegas-based SalesTraq, sales are up southern Nevada although prices continue to fall.

The 3,476 sales of existing homes in October marked the largest amount since June 2006, when there were 4,302 sales. It was more than double the 1,676 sales in October 2007, SalesTraq reported.

The median price of a home in the Las Vegas area fell $2,800 last month from the previous month to $184,000, although price drops have been much steeper in recent months. Home prices have tumbled $104,000 in the area since February 2007.

Bank-owned properties continue to have a large effect on the housing market, according to the Greater Las Vegas Association of Realtors. Foreclosures have added to the inventory and driven down home prices.

Two of every three homes sold in Southern Nevada are owned by lenders, the Realtor association said.

To help stabilize home prices throughout the country, the National Association of Realtors is calling on lawmakers and the administration of President-elect Barack Obama to spend $50 billion to subsidize lower mortgage rates, projecting that doing so would stimulate about 500,000 more home sales.

"If home prices overshoot downward, than it can lead to collateral damage to the economy," said Lawrence Yun, chief economist at the Realtors group. The cost, he added, would be "very reasonable" compared with the billions the government is spending to rescue major banks.

Since October's sales reflect contracts signed in August and September, sales could well fall further amid the fallout from the recent stock market plunge and sinking economy.

Evelyn Krazer, sales manager with Johnson Realty in St. Louis said sales activity has slowed down to "practically nothing" in recent weeks.

"Everybody's afraid of losing their job," she said. "People who are thinking about moving are holding off."

Global Insight economist Patrick Newport expects sales to fall next month, possibly to the lowest point of the U.S. housing market bust. More Americans are moving in with relatives after losing their homes to foreclosure, he said, as the economy sinks and lenders tighten their standards.

Lenders "are trying to protect themselves by holding cash," Newport said.

Still, other economists are encouraged that sales did not fall below June's sales rate of 4.85 million, the lowest point of the current housing bust.

"The market is showing signs of bottoming out," said David Resler, chief economist with Nomura Securities.

Compared with last month, sales were down in much of the country. But in the West sales were up 40.5 percent compared with October last year, without adjusting for seasonal factors. Buyers in places like Las Vegas and Orange County, Calif., snapped up distressed properties at bargain prices.

Nationwide, the Realtors group estimates that sales of distressed properties made up 45 percent of all property sales in October.

There were 4.23 million unsold homes on the market in October, down slightly from a month earlier. At the current sales pace, it would take 10.2 months to sell all the properties.

Until the inventory of homes falls to more normal levels, analysts say, the housing slump is likely to persist. Inventories remain at historically high levels, driven by a massive wave of mortgage foreclosures.