WASHINGTON — Sales of existing homes in the United States plunged by a record amount in September as turmoil in mortgage markets added more problems to a housing industry in its worst slump in 16 years.
The National Association of Realtors reported Wednesday that sales of existing homes fell 8 per cent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.
The weakness in sales translated into further pressure on prices. The median price — the point at which half the homes sold for more and half for less — fell to $211,700 (U.S.) in September, down by 4.2 per cent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.
The 8 per cent decline in sales was bigger than the 4.5 per cent decline that had been expected.
Analysts blamed the bigger-than-expected slump on the turmoil that hit credit markets and mortgage markets in August as worries increased over rising mortgage foreclosures.
Those worries resulted in a drying up of the availability of so-called jumbo mortgages, loans over $417,000, which are particularly important in high-cost areas such as California.
“Mortgage problems were peaking back in August when many of the September closings were being negotiated and that slowed sales notably in higher priced areas that rely more on jumbo loans,” said Lawrence Yun, senior economist for the Realtors.
By region of the country sales were down 10 per cent in the Northeast, 9.9 per cent in the West, 7 per cent in the Midwest and 6 per cent in the South.
Analysts said the price declines will worsen in coming months until inventories are reduced to more sustainable levels. Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted that the housing troubles will prompt the Fed to cut rates by a quarter-point at its meeting next week.
“The housing crunch is accelerating. The Fed can't stand by and watch,” Mr. Shepherdson said.
© The Globe and Mail
