Housing's worst recession since '92

Flyers touting an existing home for sale in east Denver. "With inventories still way out of line," saidan economist, "unless prices fall a lot more, the housing market will not turn around anytime soon."

WASHINGTON - Sales of existing homes fell in June for a fourth consecutive month, a sign that residential real estate remained mired in its worst recession in 15 years.

The National Association of Realtors reported yesterday that sales of existing homes dropped 3.8 percent last month to a seasonally adjusted annual rate of 5.75 million units. That is the slowest sales pace since November 2002 - and the decline was about twice what had been expected.

But the supply of homes for sale dropped for the first time this year, and the median price rose for the first time in 11 months.

The price of an existing home edged up to $230,100, 0.3 percent more than a year ago. The median is the point where half the homes sold for more and half for less.

Analysts cautioned that they expected prices to fall again in coming months because of the high level of unsold homes.

The backlog of homes for sale fell 4.2 percent. At the current sales pace, that represented 8.8 months' worth of inventory, the highest since 1992. That level was seen as a drag on the housing market.

Moreover, some analysts attributed part of the inventory decline to disappointed owners' pulling their homes off the market or deciding to rent rather than sell.

"With inventories still way out of line, unless prices fall a lot more, the housing market will not turn around anytime soon," said Joel Naroff, chief economist at Naroff Economic Advisors, of Holland, Pa.

The housing slump follows five boom years, when sales of new and existing homes set records, and home prices soared by double-digit rates. Since late 2005, sales have slumped as mortgage rates rose, and prospective buyers balked at selling prices.

Those problems have worsened in recent months because of troubles in the subprime-mortgage market, which offers loans to buyers with spotty credit histories. Rising mortgage defaults are dumping more homes onto an oversupplied market.

Countrywide Financial Corp., one of the largest mortgage lenders, on Tuesday reported a sharp decline in second-quarter profit because of an increasing number of loans going bad.

The declines in existing-home sales in June covered all parts of the country.

David Seiders, chief economist of the National Association of Home Builders, said the unexpected weakness in recent months had caused him to shave his forecast for housing construction this year. It now shows a fall of 23 percent after a 14 percent drop in 2006.

Seiders said he expected only a 2 percent rise in 2008 and the industry weakness to last longer than in previous housing dips.


Breakdown by Region

Existing homes in June. Percent changes are from May.

                 Sales    Change Median Price Change

Northeast 1,010,000     -7.3%       $294,400     +3.2%

West           1,100,000     -6.8        340,000     -0.6

Midwest     1,370,000     -2.8        171,700     +3.4

South        2,260,000     -1.7        190,800     +4.4

SOURCE: National Association of Realtors