Lower prices boost sales of ex­ist­ing homes

The Washington Times Weekly - - National - BY DAVID M. DICK­SON

Bar­gain hun­ters took ad­van­tage of fall­ing home prices in July, boost­ing sales of ex­ist­ing homes, es­pe­cially in the West, where fore­clo­sures soared and home prices plunged in the past year.

But wors­en­ing prospects for mort­gage giants Fan­nie Mae and Fred­die Mac are push­ing in­ter­est rates higher and could drive buy­ers away at a cru­cial point in the na­tion’s hous­ing cy­cle, an­a­lysts say.

Af­ter fall­ing to their low­est rate in 10 years dur­ing June, sales of pre­vi­ously owned homes re­bounded 3.1 per­cent last month as dis­tressed prop­er­ties flooded the mar­ket, rais­ing the in­ven­tory of un­sold homes to a record high, the Na­tional As­so­ci­a­tion of Real­tors re­ported Aug. 25.

But­tressed by a 9.7 per­cent sales in­crease in the West, home re­sales across the na­tion rose to an an­nual rate of 5 mil­lion homes in July. The im­proved sales num­ber in the West came at a heavy cost to home sell­ers, as the me­dian price for a home there de­clined 22.2 per­cent, or $78,000, com­pared with a year ago.

The na­tional me­dian sales price of $212,400 was 7.1 per­cent lower than it was the pre­vi­ous year. Half the homes sell for more than the me­dian price, and half sell for less.

Fore­clo­sure fil­ings in­creased 55 per­cent in July com­pared with a year ago, Real­tyTrac re­ported ear­lier this month. Bank re­pos- ses­sions alone were 184 per­cent higher in July than a year ago.

Lawrence Yun, the Real­tors’ chief econ­o­mist, es­ti­mated as many as 40 per­cent of July’s to­tal sales were dis­tressed prop­er­ties, which in­clude fore­clo­sures.

“Even if the bot­tom in sales has been reached, the down­ward pres­sure on price is still very in­tense,” said Stu Hoff­man, chief econ­o­mist of PNC Fi­nan­cial Ser­vices in Pittsburgh.

Mr. Hoff­man cited the record 4.67 mil­lion ex­ist­ing homes on the mar­ket, which rep­re­sent an 11.2-month sup­ply based on the cur­rent sales pace. That’s more than dou­ble the nor­mal in­ven­tory level, he said.

“Credit-mar­ket prob­lems could put more down­ward pres­sure on prices,” Mr. Hoff­man said. Not only have banks tight­ened their lend­ing stan­dards in re­cent months, but the trou­bles fac­ing Fred­die Mac and Fan­nie Mae are also re­duc­ing the avail­abil­ity of loans and push­ing mort­gage in­ter­est rates higher.

Dur­ing the past year, as the credit crunch squeezed bank bal­ance sheets and forced other mort­gage lenders out of busi­ness, Fred­die Mac and Fan­nie Mae have sig­nif­i­cantly in­creased the share of new mortgages that they buy or guar­an­tee. Fan­nie and Fred­die have bought or guar­an­teed about 70 per­cent of the mortgages that have been is­sued in re­cent months. To­gether they own or guar­an­tee more than $5 tril­lion of the na­tion’s $12 tril­lion in res­i­den­tialmort­gage debt out­stand­ing.

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