Unsold houses rise to 23-year high in April

Sales decline 1% even as prices plunge 8% year-on-year
By Rex Nutting, MarketWatch
May. 30, 2008

WASHINGTON (MarketWatch) -- The U.S. housing market weakened further in April with a flood of homes coming on the market even as sales and prices declined, the National Association of Realtors reported Friday.

Resales of U.S. houses and condos dropped 1% to a seasonally adjusted annualized rate of 4.89 million from 4.94 million in March. Economists expected sales to fall to 4.83 million. See Economic Calendar.

"The picture emerging from the data is not one to inspire confidence in a speedy recovery of the housing market or of the U.S. economy," wrote Gabriel Stein, an analyst for Lombard Street Research. "In spite of market belief to the contrary, the Fed is unlikely to raise interest rates soon."

Resales have sunk 17.5% in the past year and are down 33% from the peak in 2005. The pace of sales has been relatively stable since August at around a 5 million annual pace.

The inventory of unsold homes and condos jumped 10.5% to 4.55 million, an "uncomfortably high" level, said Lawrence Yun, chief economist for the real estate trade group.

The number of homes on the market represented an 11.2 month supply at the April sales pace, the biggest since the combined single-family/condo records began in 1999.

Because the inventory figures are not seasonally adjusted, "the April data is probably not as terrible as it looks," wrote Stephen Stanley, chief economist for RBS Greenwich Capital. Typically, inventories rise about 7% in April, as the spring and summer sales season kicks into high gear.

For single-family homes alone, the inventory rose to 10.7 months' supply, the highest since 1985. For condos, the inventory of 14.2 months is the highest ever.

Sales of single-family homes fell 0.5% in April to a 4.34 million annual pace, down 16% in the past year and 32% from the peak. Condo sales dropped 5.2% in April to a 550,000 annual pace.

Median sales prices for houses and condos fell to $202,300, down 8% from a year earlier and the second largest price decline on record. Median prices are down 12% from the peak.

The "growing glut of unsold homes signals further price declines ahead," wrote Sal Guatieri, an economist for BMO Capital Markets.

The median sales prices can be affected by the mix of homes sold regionally and within different price ranges. Another home price index released Thursday that tracks resales of the same homes over time showed prices have dropped 3.1% in the past year.

The Commerce Department will report on sales of new homes next week.
Retailers are reporting better sales in just the past two weeks, Yun said, following the announcement by Fannie Mae that it would abandon its declining market policy, which required higher down payments.

Several markets that have seen price declines of 20% or so are turning around, Yun said, pointing to San Diego, Detroit and Fort Myers, Fla. Markets that had been holding up are now turning lower, he said, citing the Pacific Northwest, the Carolinas, Utah and Austin, Texas.

Rex Nutting is Washington bureau chief of MarketWatch.