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Existing home sales mired in deep slump

Florida sees a 26.7 percent decline in sales, but the bay area bucks the trend, with prices going up 18.8 percent.

By ASSOCIATED PRESS
Published August 16, 2006

WASHINGTON - The nation's once-booming housing market slumped even further in the spring with sales declining in 28 states, led by big drops in the formerly red-hot areas of Florida, Arizona and California.

Sales of existing homes fell nationwide to a seasonally adjusted annual rate of 6.693-million units in the April-June quarter, down by 7.5 percent from the record rate of 7.193-million units in the spring of 2005, the National Association of Realtors reported Tuesday.

Also, the National Association of Home Builders said its monthly survey of builder sentiment fell to its lowest level in more than 15 years. The decline, which pushed the index down seven points to 32, was blamed on rising unease among home builders about record levels of unsold new and existing homes and increased cancellations of contracts for new homes. It marked the seventh consecutive drop.

"An increasing number of potential buyers are adopting a wait-and-see attitude because of uncertainty about where the housing market is headed," said David Seiders, chief economist for the home builders.

The slowdown is occurring after a lengthy boom in which sales of new and existing homes set records for five straight years as buyers flocked into the market, lured by the lowest mortgage rates in more than four decades.

But mortgage rates have been climbing for most of this year, reflecting a two-year campaign by the Federal Reserve to push interest rates higher as a way of slowing the economy and keeping inflation under control.

The biggest sales declines this spring occurred in states that had the hottest markets last year. Sales fell 26.9 percent in Arizona, 26.7 percent in Florida, 25.3 percent in California, 23.9 percent in Virginia and 23.5 percent in Nevada.

David Lereah, chief economist for the Realtors, predicted the slide in existing home sales would soon come to an end as reluctant home sellers start cutting their asking prices, which he said should spur a sales rebound.

Seiders, however, said he looked for new home sales to continue sliding for several more months before it stabilizes. He predicted that new single-family home sales, which set a record of 1.28-million units last year, will drop by about 12.8 percent this year.

In a separate survey of price changes in 151 metropolitan areas, the Realtors reported that 26 metro areas experienced outright price declines while 37 areas were enjoying double-digit price increases.

Tampa-St. Petersburg-Clearwater was seventh on the list of metro areas seeing price increases, up 18.8 percent over last year. Ocala, Gainesville and Jacksonville also were in the top seven.

Mark Zandi, chief economist at Moody's Economy.com, said he looked for more widespread price declines in coming months as the housing market adjusts to fewer speculators buying up homes in hopes of making quick profits.

"We could go from wild optimism to stark pessimism pretty quickly," he said. "As you get deeper into a correction, you begin to wonder whether things could get worse."

[Last modified August 15, 2006, 23:11:41]