The pace of existing home sales in the United States fell for a fifth straight month in August and prices dropped from year-ago levels for the first time in 11 years, a U.S. realtors group said on Monday.
Still, some economists said they saw signs the housing market was beginning to stabilize as the decline in sales showed some signs of leveling off.
I think the worst of the drops (in existing home sales) are probably behind us, but it is way too early to say that we are at the bottom, said Mark Vitner, senior economist with Wachovia bank.
The National Association of Realtors said existing homes sales slipped to an annual rate of 6.30 million units from 6.33 million in July.
But the 0.5 percent fall-off in volume was the smallest in the last five months of declines and was not as steep as expected on Wall Street, where economists had looked for the pace to slow to 6.18 million units.
The report, however, did show prices also have begun to drop compared to the lofty levels of last year, when many parts of the country saw home prices appreciate at double-digit annual rates.
The median price slipped to $225,000, off 1.7 percent from August 2005. It was the first year-on-year price decline for the U.S. existing home market since a 0.1 percent drop in April 1995.
The price drop helped lift prices for U.S. government bonds as some analysts saw it as suggesting the
Federal Reserve may have to lower benchmark interest rates in coming months.
Stock prices, however, closed higher, bolstered by lower market interest rates and the better-than-expected reading on home sales. The value of the dollar also rose.
BEGINNING TO STABILIZE
The recent softening of home sales and prices are good signs that the housing market can avoid a crash or hard landing, said Bill Hampel, chief economist for the Credit Union National Association.
He added, however, that the housing market is unlikely to come out of the doldrums soon. We are unlikely to get any real national price appreciation for the next several years, Hampel said.
The realtors' report showed the stock of unsold homes on the market rose 1.5 percent to 3.92 million units last month. At August's sales pace that represented a 7.5 months' supply, the highest since April 1993.
Kathy Lien, senior strategist at Forex Capital Markets in New York, said the most troubling aspect of the report was the drop in prices.
What was once the primary source of growth and expansion in the U.S. is now the source of concern and nervousness, she said.
But NAR chief economist David Lereah said the August slip in existing home data could be the bottom of a slump for the sector. This price drop, in my view, has stopped the bleeding in the sales marketplace, he said.
Prices will continue to come down in the short-term, Lereah said, while sales will remain flat.
He said the fact that sales had not slipped as badly in August as they had in previous months was good news for housing.
The health of the housing sector is in transactions, is home sales, not home prices.
Others agreed the August data could signal an end to the long downswing in the housing sector.
The conclusion that I'm drawing is that we're very close to the bottom of the housing market, said Bernard Baumohl, executive director of The Economic Outlook Group in Princeton Junction, New Jersey. By the first quarter of next year, we'll start to see a rebound.