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Existing Home Sales Fall For 8th Time

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By MARTIN CRUTSINGER

The Associated Press

Published: May 23, 2008

WASHINGTON - Existing home sales fell for the eighth time in the past nine months, a string of weakness expected to continue as the housing industry, mired in its worst slump in decades, battles falling home prices, tight lending conditions and a weak economy.

The National Association of Realtors reported Friday that existing home sales dropped 1 percent to a seasonally adjusted annual rate of 4.89 million units, matching the all-time low set in January. These records, which cover single-family homes and condominiums, go back to 1999.

The median price for an existing home dropped 8 percent, compared with a year ago, to $202,300. It was the second-largest price decline on record and analysts predicted prices would fall further in the months ahead given the huge backlog of unsold single-family homes.

The number of unsold single-family homes in April rose to a 10.7-month supply at the current sales pace, the highest level since June 1985.

"The housing market continues to slide away. The very large increase in inventories suggests that there are much larger price declines coming," said Mark Zandi, chief economist at Moody's Economy.com.

The housing industry is being battered by a prolonged slump that has seen sales and prices fall sharply in many parts of the country and mortgage foreclosures soar. The slump in housing and a related credit crunch, which has resulted in multibillion-dollar losses at some of the nations' largest financial institutions, has depressed overall economic growth and raised worries about a possible recession.

Those troubles, along with soaring gasoline prices and higher job layoffs, have sent consumer confidence plunging, making a housing recovery even more difficult.

"Credit remains tight, the economy is losing jobs and house prices are falling in more places and at an accelerated rate," said Patrick Newport, an economist at Global Insight. "All of this adds up to a dismal house-selling season."

Newport said he expected existing home sales would keep falling until the end of this year, probably dropping by an additional 10 percent, before starting a gradual recovery early next year.

He predicted home prices would continue to slide probably until next spring because the rising tide of mortgage foreclosures meant even more homes were being dumped on an already glutted market, further depressing prices.

As prices fall, it keeps more people sitting on the fence, analysts said, because prospective buyers don't want to purchase an asset that has the potential to fall further in price if they delay making the purchase.

"With prices collapsing, the incentive not to buy a home is increasing by the week, and with inventory showing no sign of improvement, prices will keep falling," predicted Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Sales were down the most in the Midwest, a drop of 6 percent, followed by a 4.4 percent decline in the Northeast. Sales were up 6.4 percent in the West, a region of the country where prices had fallen by the sharpest amount, and were unchanged in the South.

Even with the weak results for April, Lawrence Yun, chief economist for the Realtors, said he saw reasons for optimism that sales would start to rebound in the second half of this year as more types of mortgages become available, including programs supported by mortgage giants Fannie Mae and Freddie Mac and the government's Federal Housing Administration.

"I would encourage buyers who were disappointed by poor mortgage options to take another look at the market because the lending changes are significant," Yun said. "The second half of the year should be notably better in terms of home sales."

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