With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.
Existing home sales sank 27.2%, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.8 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.
That credit brought buyers out in droves, as they tried to sign home contracts before the 04/30/2010 deadline. Now, months later, sales are 34.0% below April's tax incentive-induced peak.
The sales pace of all homes - single family, townhomes, condominiums and co-ops, is at the lowest since NAR began tracking the figure in 1999. Sales of single family homes, which account for a bulk of the transactions, are at the lowest level since 05/01/1995.
Inventory has also continued to climb, rising 2.5% to 4.0 million existing homes for sale. That represents a 12.5 month supply at the current sales pace, the highest since 10/01/1982 when it stood at 14.0 months. A 6 month supply is considered normal. The combination of weak demand and glut of homes has put downward pressure on prices.
And as the recession proved, the housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans. The NAR report showed that the median price of homes sold was $182,600 up .7% from a year ago. Just under a 3rd of homes sold during the month were distressed properties.
Sales of single family homes sank 27.1% compared to the prior month, while condominium and co-op sales tanked 28.1%. The midwest fared the worst, with sales dropping 35.0% to an annual pace of 800,000 units, that's 33.3% lower than a year earlier.
Resales in the northwest dropped 29.5% from the previous month to an annual pace of 620,000 units. They fell by 25.0% in the west and 22.6% in the south.
references: hibah yousuf, cnnmoney, bing, awesomephotograph.com
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