February 25, 2008 / 3:04 PM / 11 years ago

Existing home sales slip and prices tumble

WASHINGTON (Reuters) - Sales of existing homes fell for a sixth straight month in January, while prices tumbled 4.6 percent amid swelling inventories, according to a report on Monday that offered no end in sight for the housing slump.

A view of a neighborhood in the town of Superior, Colorado, a Denver suburb February 27, 2006. The pace of existing home sales in the fell in January to 4.89 million-unit annual rate while prices slid and inventories swelled, the National Association of Realtors said in a report on Monday that showed continued weakness in the national homes market. REUTERS/Rick Wilking

The pace of existing home sales fell 0.4 percent in January to an annual rate of 4.89 million units, the National Association of Realtors said in its report.

Economists polled by Reuters had expected home resales to fall to a 4.80 million-unit pace from the 4.89 million-unit rate initially reported for December. The December sales pace was revised to a 4.91 million-unit rate.

The national homes market is in the worst downturn since the Great Depression of the 1930s. The NAR’s chief economist, Lawrence Yun, said the market is “scratching the bottom,” with sales holding at a deflated rate of around 5 million units for the past several months.

“This is further evidence that it will take time to get housing back on its feet. This will not be a quick turn around,” said Bret Barker, a portfolio manager with Metropolitan West Asset Management, Los Angeles.

The inventory of homes for sale rose 5.5 percent to 4.19 million units at the end of January — about 10.3 months’ supply at the current sales pace.

The national median home price fell to $201,100 from $210,900 a year earlier, the NAR said. The price of the median single-family home was $198,700 in January, the lowest since $197,700 reported in January 2005.

U.S. Treasury debt prices extended losses after the data, which many analysts said was indicative of the expected protracted downturn in the sector.


The listless homes market is adding to woes about the national economy, with many analysts predicting a near-term recession.

On Monday, the National Association of Business Economics said that 45 percent of its economists forecast a national recession before the end of the year, while a survey from the Federal Reserve Bank of Chicago traced three months’ of below-average growth for the economy.

The housing slump is likely to have a “major negative impact” on consumer spending this year, according to more than 60 percent of the economists polled by the NABE.

The U.S. Federal Reserve has cut benchmark interest rates by a cumulative 2.25 percentage points since mid-September, taking the overnight borrowing rate to 3.00 percent, the lowest level since June 2005.

Still, investors remain restless over a global credit crunch that began in the homes sector but has cast a shadow over bond insurers and the spending power of consumers.

A return to health for the homes market could signal a broader recovery but there was little sign of strength in Monday’s data. On a regional basis, sales of existing homes in January were off 3.6 percent in the Northeast, 2.1 percent in the West, and 0.5 percent in the South. The exception was the Midwest, where sales increased 3.4 percent.

Editing by Leslie Adler

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