As spring sales season starts rough, some economists expect prices to continue falling for several months.
WASHINGTON — Sales of existing homes fell in March, the seventh nationwide drop in the past eight months, as the spring sales season got off to a rocky start.
The median price of a home was down compared with a year ago, and some economists predicted that home prices could keep falling for many more months, given all the troubles weighing on housing — from a severe credit crunch to a rising tide of foreclosures.
The National Association of Realtors reported Tuesday that sales of existing single-family homes and condominiums dropped by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units.
The median price of a home sold last month was $200,700, a decline of 7.7 percent from a year ago and the seventh consecutive year-over-year price drop. It was also the second-biggest decline after a record 8.4 percent drop in February. These records go back to 1999.
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King County’s median for single-family homes — new and resale — was $439,900 last month, down 3.3 percent from the previous March, according to the Northwest Multiple Listing Service. It doesn’t separate sales of existing and new homes.
While last month’s median represents a $10,000 increase from February, it’s down 8.5 percent from the high in July, $481,000.
Patrick Newport, an economist with Global Insight, said he believed existing home sales would keep declining for another six months, with home prices falling well into 2009 given all the headwinds facing the housing market, including sinking consumer sentiment.
“All this adds up to another dismal house-selling season,” Newport said.
Democrats used the latest weak housing report to argue that Congress must pass legislation being considered this week in a House committee that would authorize the Federal Housing Administration to take on $300 billion in new loans for as many as 1 million distressed homeowners.
The legislation is aimed at helping homeowners whose mortgages are now larger than the value of their homes negotiate into lower, more affordable mortgages rather than face the prospect of defaulting on their current mortgage.
Realtors chief economist Lawrence Yun said a survey showed 18 percent of homes up for sale in March had negative equity, meaning the mortgage was larger than the value of the home. This percentage, which represented homes that were either in foreclosure or involved in a “short sale” in which the house was being sold for less than the value of the mortgage, was up from levels around 3 percent during the 2002-2006 housing boom.
Sen. Charles Schumer, D-N.Y., said the increase in homes with a negative equity underscored the need for Congress to act quickly “to prevent this crisis from getting any worse.”
Yale economist Robert Shiller, who developed one of the widely followed gauges of home prices, said in a speech Tuesday that home prices, which have fallen about 15 percent from their peak in 2006, may fall farther than the 30 percent drop during the Great Depression.
“Basically we are in uncharted territory,” Shiller said, noting that the 85 percent increase in home prices from 1997 to 2006 after adjusting for inflation had represented the biggest housing boom in U.S. history, so the fall could be just as historic.
Mark Zandi, chief economist at Moody’s Economy.com, said he believed home sales could hit bottom this spring, but he said the fall in prices was only half complete, with further declines needed to work off still large levels of unsold homes.
“It will be a long and painful end to the housing downturn because it will take a lot more price cutting to work off all of the inventory that is out there,” he said.
Times real-estate reporter Elizabeth Rhodes contributed to this report.