Existing-home sales down 8.4%

Existing-home sales down 8.4%
BY MARTIN CRUTSINGER
Copyright 2007 Associated Press.
January 26, 2007


After a five-year boom, the nation's housing market cooled considerably in 2006 with existing-home sales falling by the largest amount in 17 years.
While the worst might be over, the rebound could be slow in coming, analysts said, given a continuing huge backlog of unsold homes that will keep downward pressure on prices, particularly in former boom areas.

The National Association of Realtors reported Thursday that sales of existing homes totaled 6.48 million units for all of 2006, down 8.4 percent from 2005 when 7.08 million existing homes were sold, the fifth straight year that sales hit an all-time high.

That boom drove prices up at double-digit rates and caused a stampede of investors into the market.

Thursday's housing report contributed to stocks suffering their biggest pullback in two months, with the Dow Jones industrials logging a triple-digit decline.

The Dow fell 119.21, or 0.94 percent, to 12,502.56. The Standard & Poor's 500 index fell 16.23, or 1.13 percent, to 1,423.90 and the Nasdaq composite index was down 32.04, or 1.30 percent, at 2,434.24.

David Lereah, chief economist for the Realtors, said that 40 percent of home sales in 2005 represented purchases by investors and people buying vacation homes.

''A lot of those people have now left the market,'' Lereah said, predicting that sales have bottomed out and should start a slow rebound in 2007.

Other analysts cautioned that the rebound probably will be extremely slow because it will take time for unsold inventories to be worked down and for speculators to unload homes.

Even with the sales decline in 2006, the median price of a new home managed to rise slightly last year to $222,000, compared with a median of $219,600 in 2005.

AP