House hunters shied away from buying in July, driving down sales of previously owned homes to a 2 1/2 -year low and propelling the inventory of unsold homes to a record high.
Existing-home sales dropped 4.1 percent in July from June, to a seasonally adjusted annual rate of 6.33 million units, the National Association of Realtors reported. That is the lowest level since January 2004.
The figures provided fresh evidence of how much the once-sizzling housing market has cooled. Prospective home buyers have turned cautious about making such a big-ticket purchase as mortgage rates have gone up and uncertainty has arisen over whether the economy and job creation will keep slowing, analysts said.
The latest snapshot of housing activity was weaker than analysts anticipated. Economists were forecasting the pace of sales to fall to 6.55 million.
Although sale prices for homes are no longer bounding ahead, some prospective buyers are still waiting for better deals - another factor in the weak showing, economists said.
"Many potential home buyers have been on the sidelines, some kicking the tires but mostly waiting for sellers to compromise on prices and terms," said David Lereah, the association's chief economist.
Economists said the data showed that the housing market is following the traditional path of a slowdown: a drop in sales that is followed by a decline or a plateau in prices.
"It does feel a little scary right now," said Celia Chen, director of housing economics at Moody's Economy.com. "I think these markets will correct. The price gains that they have seen have exceeded what can be supported by the economic and demographic fundamentals."
"We had a hot market, and now it's going to be back to normal," said Edward Leamer, an economist at the University of California, Los Angeles. "Sales volumes will continue to decline, although they'll bottom out sometime in the next year."
The median nationwide price of a home sold last month was $230,000, up just 0.9 percent from the same month last year. The median price is the middle point, where half sell for more and half sell for less.
Meanwhile, the inventory of unsold homes in July rose to a record 3.86 million. At the current sales pace, it would take 7.3 months to exhaust that overhang. That is the longest period to exhaust the supply of homes since the spring of 1993.
Sales tumbled 6.4 percent in the West in July from June. Sales fell 5.9 percent in the Midwest and 5.4 percent in the Northeast. In the South, sales dipped 1.2 percent.
The Baltimore area also is seeing an end to the housing boom. In July, housing sales fell more than 23 percent from July 2005 levels, Rockville-based Metropolitan Regional Information Systems Inc. reported Aug. 10.
Sales in Baltimore and five surrounding counties totaled 3,333 in July, down from 4,362 a year earlier, the MRIS said. That represented the biggest decline for any month since MRIS began tracking data in the region in March 1999. The area has more than twice as many homes on the market as there were last summer.
Sellers are holding out for unrealistic prices in a market where appreciation has slowed, said Anirban Basu, an economist who is chairman and chief executive of Sage Policy Group Inc. in Baltimore.
"In Baltimore, sellers are even more reluctant than they are nationally to part with their homes at a discount" because they're counting on an influx of buyers as a result of the federal base realignment and closure bringing in jobs, Basu said. "They've all heard about the base realignment and the region's inability to house the work force of the future and they view their homes or investment properties as being very valuable and therefore not worthy of a discount."
But the economy in the state and metro area has slowed, with job growth weaker in the past few months than it had been during 2004 and 2005, and sellers have been slow to recognize this, he said.
As the shift from seller's market to buyer's market has continued, price appreciation in the Baltimore area has slowed markedly from the nearly 20 percent annual gain registered in July 2005. The price of the average home rose 6.03 percent over a year earlier, making July the second consecutive month of single-digit appreciation. Before June, average monthly prices on Baltimore-area homes on a year-over-year basis had risen by double digits in every month since March 2004.
Despite the cool-off, experts view Baltimore's housing market as better positioned during a housing slowdown than many other metropolitan areas. Washington-based workers will continue to be attracted to Baltimore's more affordable housing, Basu said.
"Washington will continue to generate jobs, as will Baltimore, albeit at a slower pace," Basu said.
The slowdown means that housing, the sector of the economy that has helped to carry the country through a period of rapid expansion, could now act as a drag on growth.
Most economists, including Federal Reserve Chairman Ben S. Bernanke, expect the slowdown to be orderly. But with home builders reporting a sharp pullback in interest in new homes, existing home sales in many local markets now look set to weaken a while longer.
July's data showed that prices fell in most areas of the country along with sales.
The sales and price declines were most pronounced on the East and West coasts, where the housing market had overheated the most. In the Northeast, where median existing home prices rose last year by 10.7 percent, prices fell 2.1 percent in July from a year earlier.
In the West, which is dominated by California, prices fell 0.3 percent in July. Last year, they rose 17.7 percent.
Only in the South are prices still rising: the median home there sold for 3.2 percent more last month than a year ago. If prices there had not been so strong, the national median home price in July would have declined on a year-over-year basis for the first time since April 1995.
Though prices are sliding, most economists are still predicting that they will not fall very far.
Source:
http://www.baltimoresun.com/busines...-home-headlines
Existing-home sales for July were lowest since January 2004 
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