Home Sales Slowed by Credit Crisis
10.7% fall shown from August 2007
September 25 2008 - The credit crunch slowed sales of existing homes in August, the National Association of Realtors reported Wednesday.
Existing home sales were down by 2.2% in August to a seasonally adjusted annual rate of 4.91 million units compared with 5.02 million units sold in July and are down 10.7% from August 2007.
“The difficulty in obtaining a mortgage increased over the past couple months, making it more challenging for creditworthy borrowers to find financing,” said Richard Gaylord, president of the association and a broker in Long Beach, California.
Gaylord said he had serious concerns about whether the $700-billion bailout Congress is considering would ease credit for people wanting to buy homes.
“Historically, housing had led the nation out of economic doldrums. There will not be an economic recovery without a housing recovery,” said Lawrence Yun, chief economist for the national Realtors group.
He said interest rates for a 30-year, fixed-rate mortgage fell to 5.78% last week from 6.48% in August as a result of the government takeover of Freddie Mac and Fannie Mae.
“With higher loan limits and a beefing up of the FHA program, all the mechanisms have been falling into place to increase mortgage availability,” Yun said. “However, home sales will be constrained without a freer flow of credit into the mortgage market.”
The median existing home price was $203,100 in August, a 9.5% drop from last August, when the median was $224,400.
In Michigan, the average sales price in July, the most recent data, was $123,139, a 13.5% drop from the $142,290 average price in July 2007. Sales of existing homes from January to July were down 1.4% to 57,101, according to the Michigan Association of Realtors.
Yun said the fall in home prices is a result of subprime mortgages accounting for a disproportionately high share of sales in the market now. States such as California, Florida and Nevada, which have seen the largest price cuts, are seeing better sales.
Total housing inventory fell 7% in August to 4.26 million existing homes on the market, or a 10.4-month supply at the current sales pace.
Home sales slowed by crisis
by GRETA GUEST | FREE PRESS