Business

Sales of new, existing homes plummet

Posted December 23, 2008 10:06 a.m. EST
Updated March 9, 2009 5:11 p.m. EDT

— Sales of existing homes plummeted far more than expected last month as buyers reeled from October's big plunge on Wall Street, a national real estate group said Tuesday. The median sales price fell by the largest amount on record.

The National Association of Realtors said sales of existing homes fell 8.6 percent, to an annual rate of 4.49 million, in November, from a downwardly revised pace of 4.91 million in October.

Sales had been expected to fall to a pace of 4.9 million units, according to Thomson Reuters, a service that polls analysts to establish a consensus.

The median sales price plunged 13.2 percent in November, to $181,300, from $208,000 a year ago. That was the lowest price since February 2004 and the biggest year-over-year drop on record going back to 1968.

In North Carolina, 4,959 homes sold in November, down 22 percent from October and 40 percent from a year ago, according to the North Carolina Association of Realtors. The median home price statewide dropped 11 percent, from $222,681 a year ago to $198,908.

The Triangle market saw less of a decline, with sales down 15 percent from October, from 1,397 to 1,186, and median prices down 7 percent from a year ago, from $242, 316 to $226, 528, the association reported.

"This market has been in a bit of a slowdown," said Kelly Cobb, an agent with Fonville Morisey Realty.

Although Cobb lost a pending sale of a home in Cary's MacGregor Downs subdivision when the buyer became spooked by the  shaky economy, she said she believes the sales numbers are misleading. Winter sales are typically slow, she said, but sales of middle-range homes have remained steady for her, while the high-end home market is soft.

"I think it's more of a psychological downturn than it is a reality," she said.

For Cary homeowner Laura Cherry, the reality is that she might have to drop the price on her home, which has been on the market for eight months.

"It's been frustrating," Cherry said. "I get a sense they know it's a buyer's market, (that) they're in control."

Nationally, sales of new homes also fell in November to the slowest pace in nearly 18 years, while new home prices dropped by the biggest amount in eight months.

The Commerce Department reported Tuesday that new home sales fell 2.9 percent, to a seasonally adjusted annual sales pace of 407,000 units. That was a weaker performance than economists had expected and was the slowest sales pace since January 1991.

The median price of a new home sold in November was $220,400, a drop of 11.5 percent from the sales price a year ago. That was the biggest year-over-year price decline since a 12.7 percent fall in March. The median is the point where half the homes sold for more and half for less.

The annual sales pace of 407,000 new homes was even weaker than the 420,000 that private economists had expected. In addition, the government revised the October performance sharply lower to a sales rate of 419,000 units, instead of the 433,000 sales previously reported.

Builders have struggled to reduce production in the face of a two-year slump in housing that has seen sales and prices plummet. November sales activity was depressed by the worst financial crisis in seven decades, which has made it harder for potential buyers to get home loans.

The year-over-year decline in November was the biggest since a 50.5 percent plunge in the 12 months ending in April 1980.

The inventory of unsold new homes stood at 374,000 in November, down 7 percent from the October inventory level. It would take 11.5 months to exhaust the current supply of new homes at the November sales pace. That inventory bulge is still seen as too high, given that a tide of foreclosures is dumping many houses onto an already glutted market.

Many analysts believe the housing slump will last well into next year, given the difficult sales environment.

The national sales weakness in November reflected a 16.4 percent drop in the Midwest and a 7.1 percent fall in the South. Sales were up 14.3 percent in the Northeast and 11 percent in the West.

Cobb said she believes the Triangle housing market is poised to explode again. The occupancy rate in local rental properties is above 90 percent, with many renters waiting to sell homes in other states before buying in the area, she said.

"I think we have pent-up demand in this area," she said.