Median Home Prices Fall… More Than Ever Before

The median price on existing homes in the U.S. didn’t just fall last month - it fell by the largest amount ever.

The National Association of Realtors said Tuesday that existing home sales edged up 0.5 percent to a seasonally adjusted annual rate of 6.24 million in October; it marked the first increase after seven consecutive monthly declines.

However, the median price for a home sold dropped to $221,000 in October, a decline of 3.5 percent from a year ago. It was the biggest year-over-year price decline on record and a clear sign that the time is right to apply for home mortgage loans. Buyers have all the leverage.

The numbers represented the third straight month that median prices have fallen compared with the same period a year ago, the longest stretch of such declines on record.

David Lereah, chief economist for the Realtors, said he expected home prices to continue falling for the rest of the year as sellers, accustomed to the booming market conditions of previous years, reluctantly cut their prices.

“Many buyers remain on the sidelines,” Lereah said. “After a period of price adjustment, we’ll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007.”

Fears that the slow housing market would drag down the entire economy have eased in recent months as a big fall in gasoline and other energy prices has provided support for consumer spending.

The overall picture: For October, sales were down 2.9 percent in the Northeast and 1.2 percent in the South. However, they rose by 6.4 percent in the West and were unchanged in the Midwest.

The inventory of unsold homes rose by 1.9 percent in October to 3.85 million units, the second highest total on record. It would take 7.4 months to exhaust the backlog of unsold homes at the October sales pace; another sign of how home purchase loan applicants can secure better deals than ever from desperate sellers.

By region of the country, median prices were down the most in the South, a drop of 7 percent followed by declines of 5.2 percent in the Northeast, 1.2 percent in the Midwest and 0.6 percent in the South.

Lereah said the big price decline in the South could represent not only sellers adjusting their asking prices, but also a changing mix of sales with lower-priced areas in the region, such as Texas, seeing an increase in sales; while high-priced areas such as the Washington, D.C., area and Florida mortgage market still suffering sales declines.