Home Sales Drop for Sixth Straight Month
WASHINGTON – Sales of existing homes, depressed by turmoil in credit markets, fell for a sixth straight month in August, pushing activity to the lowest point in five years.
The National Association of Realtors said that sales of existing single-family homes dropped by 4.3 percent in August, compared to July. Sales at a seasonally adjusted annual rate dropped to 5.5 million units, the slowest pace since August 2002.
The housing market has been battered by the steepest downturn in 16 years. Those problems were exacerbated in August by turmoil in credit markets, reflecting new worries about rising defaults in subprime mortgages.
The median price of an existing home — the point where half sold for more and half for less — edged up slightly in August to $224,500, an increase of 0.2 percent from August 2006. It marked the first year-over-year price increase after a record 12 straight months of declining prices.
However, many analysts believe that sales and prices will fall further as the housing market receives additional blows from rising default rates that are dumping more homes on an already glutted market and causing lenders to tighten standards. These factors have made it harder for potential borrowers to qualify for loans.
The Federal Reserve responded last week to fears that all the problems in housing and credit markets could cause a recession by cutting a key interest rate by a bigger-than-expected half point.
Many economists believe that if the Fed continues to cut rates for the rest of the year that should be enough to keep the country out of a recession.