Home Sales Reach 10 Year Low
Sales of existing homes fell to the lowest level in nearly a decade in January while the average price for a home dropped for the fifth straight month.
The National Association of Realtors said Monday that sales of single-family homes and condominiums dropped by 0.4 percent last month to a seasonally adjusted annual rate of 4.89 million units, the slowest sales pace on records going back to 1999.
The median price of a home sold in January slid to $200,000, a drop of almost 5% from a year ago.
The drop in sales and the fifth consecutive decline in prices underscored the continued pressure facing housing, which is struggling to emerge from its worst slump in a quarter-century.
Sales were weak in all parts of the country except in Southwest, where Texas sales posted an increase of 3.4 percent. Sales dropped by 3.6 percent in the Northeast, 2.1 percent in the West and 0.5 percent in the West.
Sales of both existing homes and new homes tumbled for a second straight year in 2007 as the housing industry was battered by a severe credit crunch that hit in August as major financial institutions began reporting multibillion-dollar losses on their investments in risky subprime mortgages, loans made to homeowners with weak credit.
The market for subprime mortgages has essentially dried up and other types of loans have become harder to obtain as lenders have tightened their standards.
Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out with a rebound expected to start toward the end of this year.
“Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales,” he said.
Lawrence noted that he expected demand to be bolstered in coming months by the action of Congress in the economic stimulus bill to raise the caps on the size of loans that can be backed by Fannie Mae and Freddie Mac and the Federal Housing Administration.
Both realtors and mortgage lenders are guarded optimistic for 2008.
February 26th, 2008 at 7:04 am
Due to the increased demand for homes and other property over the last five years, lenders sought to find ways to increase the number of real estate loans they gave out. The problem in the subprime mortgages sector came about because of loans that were made to people who were not well qualified to receive such a loan. What then happened was that they began to default on these loans almost en masse.
February 26th, 2008 at 4:14 pm
I have a question not related to the article printed above.
I own a waterfront propery on the South Padre Island.
Not ocean front, but channel front with a boatlift and a water slip.
The property has been for sale for several months.
I have no mortgage and the value is between 500 and 600K.
I also have SEP and other invested funds valued at 500K.
I want to purchase a second home in another city.
How can I get 400K of my equity to purchase this property?
SEP can’t buy it because I will use it.
A Reverse mortgage has major limitations because the average selling price of homes in Cameron county is so low that the maximum a Reverse mortgage gives is less than 1/4 of the value of my house.
I have well over 1 million dollars in assets, I ask again, how can I get my hands on 400K without taking a conventional mortgage.
March 1st, 2008 at 2:39 am
Thanks for the insite… I personally think it’s going to get worse before it gets better. bottom more like 2011!
March 6th, 2008 at 11:57 am
It’s going to be a long haul for anyone trying to sell a home, as more and more foreclosures are hitting lenders and more and more inventory lands on the market. We have a long way to go before it gets better, and credit becomes increasingly harder to get–even for those buyers with good credit.
April 4th, 2008 at 6:03 am
I’m very concerned this will end up becoming a recession. People have been remortgaging for years building up debt on their properties and now lenders are closing up shop. We got lots of advice from a family member at http://www.mortgages2suitu.co.uk that even though house prices might be going down, interest rates are going up. Even the Bank of England is having trouble keeping rates down.