RISMEDIA, June 28, 2007?(MCT)?The funk goes on in the nation’s housing market, where Monday’s news of flat home sales in May might have been greeted as relatively reassuring if the supply of homes for sale had not reached the highest level since 1992, feeding fears that prices will take a hit.
Existing-home sales last month declined only marginally from the month before, dipping 0.3% across the country, while the median sales price dropped 2.1% from a year earlier, according to data released Monday by the National Association of Realtors. Year-over-year, however, national home sales are down 10.3%, and Chicago-area sales are off 20.7%.
Economists said those downturns, though hardly encouraging, were part of a continuing correction under way since late 2005. They were more concerned, they said, with the inventories of homes for sale, which climbed 5% last month to a nine-month supply, meaning that if no other homes were to come on the market it would take nine months to sell the 4.43 million available, the NAR reported.
Analysts said the ballooning supply undoubtedly would put pressure on prices. The NAR said the median home price across the country in May was $223,700.
“The daunting figure is the months of inventory,” said Bob Walters, chief economist for Quicken Loans in Livonia, Mich. “That inventory translates into lower prices in the future.”
In Illinois the $205,500 median price paid for a home in May was unchanged from last year, though Chicago-area prices were up 1.2% from the year before, at a median $252,388.
The Illinois Association of Realtors said in a separate report Monday that the market was showing improved momentum, with sales rising for the fourth consecutive month. Nonetheless, statewide sales were still 18.6% below those of May 2006.
“I don’t think there’s a positive here,” said Patrick Newport, U.S. economist for Global Insight, an economic analysis firm in Lexington, Mass. “Whatever numbers came in for May are irrelevant because of what has happened in the past six weeks.”
Newport said the recent rise in mortgage-interest rates and the tightening credit standards because of turmoil in subprime lending are causing his firm to reassess its housing forecast.
“A few weeks ago we were saying 1/8a housing recovery was possible3/8 in the first quarter of 2008,” he said. “We’re going to rethink that, given the recent changes. We may push it back. The news isn’t good.”
The NAR suggested that rising inventories and softening prices might help make homes more affordable, but Walters said the changes in the mortgage market have closed that door.
“The average person on Main Street doesn’t understand” the impact of tightening lending standards and rising rates, he said. “But it means that 10 to 15% of borrowers who could get a mortgage at the beginning of the year can’t get one today. That’s substantial. That’s a rippling effect.”
There was at least one happy voice in the housing market Monday: Chicagoan Mark Stinson signed a contract to sell his Roscoe Village home after just three weeks on the market.
“It was real fast, a lot faster than I expected,” said Stinson, who credited the speedy sale to reasonable price expectations. “It was marketed well, but it wasn’t a fire sale.
“Like any seller, you have images of your home being worth a lot. But we’ve seen a lot of people around the neighborhood who price their homes high and they just sit there.”
His agent, Beth Ryan, said Stinson had two offers, and got “pretty close” to the $899,900 asking price Monday.
NAR economist Lawrence Yun said consumer behavior is outweighing economic indicators.
“Psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,” he said.
“The market is underperforming when you consider positive fundamentals such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices,” Yun said. “It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market.”
The NAR adjusted its pace of annualized home sales to 5.99 million in May from 6.01 million forecast in April.
The group said condos sold somewhat better than single-family homes in May. Sales of houses nationwide slipped just slightly from April to May and were nearly 11% slower than a year earlier. But condominiums blipped upward, 2.6% month-to-month. However, condo sales still were 6.7% down from a year earlier, the NAR said.
Copyright ? 2007, Chicago Tribune
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