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U.S. unsold homes at record level

Sales pace tops forecast but prices fall 8% amid unsold glut

Sales of previously owned U.S. homes slipped last month and the backlog of unsold properties hit a record high, according to data yesterday that suggested the market's downturn still has a long way to run. Home resales fell 1 per cent in April to a 4.89 million-unit annual rate, the National Association of Realtors said.

The sales pace was a bit better than expected on Wall Street, but the stock of unsold homes surged 10.5 per cent to 4.55 million units, leading economists to warn of further market woes ahead.

At the current sales pace, the supply of homes reached 11.2 months' worth, the highest since the trade group began tracking single-family and condo properties together in 1999. For single units, the supply was 10.7 months' worth, the most in 23 years.

"The increase in unsold inventory suggests that the housing downturn will continue on through this year and well into next," said Moody's Economy.com chief economist Mark Zandi.

The report showed the median home price in April was down 8 per cent from a year ago, at $202,300. It was the second-largest price decline on record, following the biggest drop in February.

"The big surprise was the inventory of unsold homes rising to a record level,' said Rudy Narvas, a senior analyst at 4Cast Ltd. in New York.

Other price measures have shown even steeper drops.

The Standard & Poor's/Case Shiller home price index of 20 metropolitan areas showed a drop of 12.7 per cent in the 12 months through February, with prices down 15.8 per cent from their June 2006 peak. The March index will be released Tuesday.

"With prices collapsing, the incentive not to buy a home is increasing by the week, and with inventory showing no sign of improvement prices will keep falling," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Moody's Zandi said about one-fourth of the sales likely were due to foreclosure, which he said was another negative sign.

NAR chief economist Lawrence Yun said that foreclosed homes, which sell at substantially lower prices, were increasingly showing up in the existing home sales data.

"Several markets are seeing a significant rise in home sales," Yun said. "These markets are also the markets that have witnessed a substantial decline in prices."

The trade association said last month's existing home sales pace was 17.5 per cent below the rate of April 2007, with single-family home sales off 16.1 per cent and sales of multiple family units down 27.9 per cent.

May 24, 2008 in World View [of real estate] | Permalink

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