Washington – Is this what a housing bust looks like? New- home prices fell last month by the largest amount in 35 years, and owners are being warned to brace for further declines, especially in formerly hot markets.
After years of increases, some buyers say prices are still out of their range.
The Commerce Department reported that the median price for a new home sold in September was $217,100, a decline of 9.7 percent from September 2005.
That was the lowest median home price in two years and the sharpest year-over-year decline since December 1970, providing dramatic evidence of the slowdown in the housing market.
The median price is the middle point, where half sell for more and half sell for less.
The price decline for new homes followed a report Wednesday that prices in the much bigger existing-home sales market also dropped on a year- over-year basis in September by 2.5 percent, the largest decline in records going back nearly four decades.
The price decline for new homes in September came while the sales pace picked up, rising by 5.3 percent to a seasonally adjusted annual rate 1.075 million homes.
It was the second consecutive increase in sales following three months of declines. But even with the improvement, sales activity is down 14.2 percent from a year ago.
Some potential buyers are deciding to hold off in hopes prices will fall further.
Russell Saimons, a 37-year-old financial adviser in Seattle, said from what he could observe, home prices have not come down that much in his area but “they’re not increasing like they were a year or two ago.” He said he eventually wants to buy a home but “it probably won’t happen for two to three years” because he expects prices to keep falling.
Latonya Barbery, 33, a medical assistant in Old Bridge, N.J., said she has looked for a home for 18 months.
“They’re asking too much for these little shacks,” she said Thursday.
Analysts say further price declines are probable for both new and existing homes. A glut of unsold homes is forcing builders to throw in expensive incentives such as granite countertops and swimming pools in order to sell homes.
“The housing market correction is in full swing but it probably has another year to go before it bottoms out,” said Mark Zandi, chief economist at Moody’s Economy.com. “It is going to be painful because there are a lot of price declines to come.”
