Existing home sales hit 9-year low

Sales of existing homes fell to the lowest level in nearly a decade in January while the median 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 $201,100, a drop of 4.6 percent 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 the Midwest, where 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 South.

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.

He said he expected demand to be bolstered in coming months by congressional action on 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.

But other economists were not as optimistic, noting that there is a huge overhang of unsold homes, which rose in January to a 10.3 months supply, meaning it would take that long to exhaust existing inventories. That is about double what the inventory level had been during the housing boom.

Analysts said this overabundance of unsold homes would continue to depress sales and prices for some time to come.

"Expect sales and prices to keep falling," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "There is no end in sight for the housing disaster."

The slump in housing that began in 2006 followed a boom period in which sales and prices had soared to record levels. Many economists believe that the sharp turnaround has severely depressed economic growth and boosted the odds that the country could fall into a full-blown recession.