Home Sales Decline Sharply, Fall in Home Prices Points to Recession

Published Sep 26, 2007 | RSS Feed

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Home sales fell considerably during the month of August, and are now at a five year low. Prices have fallen to levels not seen since the last recession.

Existing Home Sale Data

Area	Aug 06 Sales	Aug 07 Sales	% Chg
United States	6,310,000	5,500,000	-12.8
Northeast	1,060,000	1,000,000	-5.7
Midwest	1,430,000	1,280,000	-10.5
South	2,520,000	2,200,000	-12.7
West	1,290,000	1,010,000	-21.7

Source: National Association of Realtors (NAR)

According to data released Tuesday by the NAR, total existing homes sales (single-family, condos, townhomes, and co-ops) fell considerably during the month of August when compared to the same time last year. Sales are now at the lowest level seen in five years.

Looking at the numbers, it seems the biggest decline occurred in the West, where sales tumbled by more than 20 percent. However, there are certain areas of Florida that are just as bad if not worse. The Florida Association of Realtors reported a 26 percent decline in existing home sales for the state, and a 45 percent decline for cities like Miami.

In a press release, the NAR also noted that home inventory has climbed to a 10-month supply nationwide--up from 9.5 months in July. This is the largest surplus of inventory seen since February 1988.

Home Price Data

Metro Area	Prices Up/Down
Detroit, MI	-9.7%
Tampa, FL	-8.8
San Diego, CA	-7.8
Phoenix, AZ	-7.3
Washington DC	-7.2
Miami	-6.4
Las Vegas, NV	-6.1
Los Angeles, CA	-4.8
San Francisco, CA	-4.1
New York, NY	-3.8
Cleveland, OH	-3.6
Minneapolis, MN	-3.4
Boston, MA	-3.4
Denver, CO	-0.7
Chicago, IL	-0.9
Dallas, TX	+0.7
Atlanta, GA	+1.2
Portland, OR	+3.8
Seattle, OR	+6.9

Source: Standard & Poor's/Case Shiller National Home Price Index

Of the 20 major cities covered by the Case-Shiller index, 16 saw a decline in home prices in a year over year comparison. The largest declines were in the economically depressed Rust Belt and bubblicious cities along the coast.

The changes being reported by S&P/Case-Shiller are alarming for several reasons. First and foremost, the last time prices fell this far this fast, it took eight years for home prices to reach their peak once again. Second, this is the sharpest rate of decline seen since 1991 when the country was coming out of a recession.

And last, but not least, we have not yet reached the bottom of the current slump, which means homeowners can now confidently expect double-digit declines before all is said and done.

Economist Robert Shiller confirmed this line of thought in an interview with MarketWatch yesterday, saying 'there's no end in sight' and 'the big effects are likely to come next year.'

'We might see a decline in consumer spending and a decline in confidence that could lead to a recession,' said Shiller

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