WASHINGTON — Sales of existing homes plunged by a record amount in September while median home prices dropped by the largest amount in nearly a year, reflecting deepening problems in the troubled housing market.
Analysts said the downturn is already more severe than the housing slump of the 1990s, and they predicted before it is resolved it will rival the 1980-82 housing slump when the industry was battered by double-digit mortgage rates and a steep economic downturn.
The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.
The median price – the point at which half the homes sold for more and half for less – fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It was the biggest price drop since last October and marked the 13th time out of the past 14 months that the year-over- year sales price has decreased.
In metro Denver, existing- home sales dropped 9 percent in September from a year ago, according to a separate analysis of local Multiple Listing Service data. But the median price of a single-family home increased 0.8 percent to $245,000. The median price for a condo dropped 5 percent to $148,000.
Nationally, problems in housing worsened in September following a severe credit crunch that hit in August as banks and other lenders tightened standards in the face of soaring mortgage defaults. The market all but dried up for subprime borrowers, those with weak credit histories, and people seeking so-called jumbo loans over $417,000.
Many economists say the problems in housing could well last for another year, given record-high levels of unsold new and existing homes.
“The housing market is unraveling,” said Mark Zandi, chief economist at Moody’s . “We are in a steep downturn, and the prospects are that it is going to get worse before it gets better.”
The 8 percent decline in sales was bigger than the 4.5 percent drop that had been expected. It marked the seventh straight monthly decline and left sales activity 19.1 percent below the pace of a year ago. Last week, the government reported that construction of new homes slid to the slowest pace in 10 1/2 years in September as builders continue to cut back because of weak demand.
The housing slump followed five straight years of record sales, a boom that was fueled by the lowest mortgage rates in four decades.
Analysts blamed the bigger-than-expected sales slump in September on the turmoil that hit credit and mortgage markets in August as worries increased over rising foreclosures.
“Mortgage problems were peaking back in August when many of the September closings were being negotiated and that slowed sales notably in higher priced areas that rely more on jumbo loans,” said Lawrence Yun, senior economist for the Realtors.
Sales were down 10 percent in the Northeast, 9.9 percent in the West, 7 percent in the Midwest and 6 percent in the South.
The slowdown in sales meant that the inventory of unsold homes rose to 4.4 million units in September. At the September sales pace, it would take 10.5 months to eliminate the overhang of unsold homes, a record length of time.
Denver Post staff writer Margaret Jackson contributed to this report.
