Home sales bring to mind great depression

WASHINGTON - Sales of existing single-family homes plunged in 2007 by the largest amount in 25 years, closing out an awful year that saw median prices fall for the first time in at least four decades.

The National Association of Realtors reported Thursday that sales of single-family homes fell by 13 percent last year, the biggest decline since a 17.7 percent drop in 1982. The median price of a singlefamily home fell to $217,800 in 2007, down 1.8 percent from 2006.

It marked the first annual price decline on records that the Realtors have going back to 1968. Lawrence Yun, the Realtors’ chief economist, said it was likely the country has not experienced a decline in home prices for an entire year since the Great Depression.

Private economists said the size of the sales plunge and decline in prices underscores the severity of the housing slump. Last week, the government said construction of new homes fell by 24.8 percent in 2007, the second-biggest decline on record, exceeded by a 26 percent plunge in 1980.

“We are closing the book on the worst year for housing possibly since the Depression,” said Joel Naroff, chief economist at Naroff Economic Advisors. “I keep thinking a bottom is near, but we haven’t gotten there yet.”

The year ended on an exceptionally weak note, with total sales of both single-family homes and condominiums dropping by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units.

David Wyss, chief economist for Standard & Poor’s, said he thinks sales of existing homes would continue declining until the middle of this year, with prices probably falling for all of 2008.

“When you look at the inventory levels, there are just a lot of unsold homes on the market that we have got to get rid of,” Wyss said.

The report showed the inventory of unsold homes did fall 7.4 percent to 3.91 million units in December, but part of that probably reflected disappointed homeowners taking houses off the market.

The 13 percent drop in singlefamily home sales last year followed an 8.1 percent decline in 2006 that happened after sales had set record highs for five straight years.

That housing boom fueled a speculative frenzy in many parts of the country, luring many investors into the market hoping to buy homes and flip them for quick profits as home prices in those areas soared at double-digit rates.

The abrupt end to the boom has been a drag on the economy and resulted in record levels of mortgage defaults and the prospect of millions more homeowners losing their homes because they cannot afford higher monthly payments as introductory mortgage rates reset to higher levels.

The Bush administration brokered a deal with the mortgage industry to freeze rates on certain subprime mortgages for five years, hoping that’ll prevent a further cascade of mortgage defaults.

SPRINGS-AREA HOME SALES DOWN 16.1%

In the Colorado Springs area, home sales totaled 9,995 last year, down 16.1 percent from 11,911 in 2006, the Pikes Peak Association of Realtors said. It was the lowest annual sales total since 2002.

The average price of new and existing homes that sold last year fell 0.3 percent to $259,629 from $260,304 in 2006, the association said. The average price of all existing homes sold last year increased 0.9 percent to $245,670 from $243,372 in 2006. The figures reflect prices of homes whose transactions were handled by real estate agents.