It wasn't too surprising that median prices for U.S. used homes dropped again in March—the seventh straight month of declines, the National Association of Realtors reported on Apr. 22.
The mounting glut of unsold homes might be a bigger concern for economists. The housing inventory in March increased 1%, to 4.06 million homes available for sale. That represented a 9.9-month supply at the current sales pace (up from 9.6 months in February), the report said. In March last year, before the credit crunch gripped the nation, the market had 7.5 months of inventory.
"Given both that the inventory overhang increased a bit and that recessionary job losses could lead to more foreclosures, the outlook is not good at all," said Anirvan Banerji, director of research for the Economic Cycle Research Institute. "It's likely that we'll see many more months of price declines."
The national median existing home price in March dropped 7.7% from a year earlier, to $200,700. In the West, which is strongly influenced by the slumping California market, median home prices fell 14.7% to $285,100. In the South the median price was $167,200, down 7.1% from a year ago. The median price in the Midwest fell 5.3%, to $152,600. In the Northeast, however, the median price was $284,300, up 4.6% from a year earlier.
Room to Fall Further
Sales were down 2% from the previous month, to a seasonally adjusted annual rate of 4.93 million units. In the Northeast and the West, sales edged up 2.2% from February. And sales fell 3.5% in the South and 6.5% in the Midwest.
Yale economist Robert Shiller, who is famous for accurately predicting the dot-com bust, said on Tuesday that housing prices could tumble beyond the 30% decline recorded during the Great Depression. Home prices have fallen 15% since they peaked in 2006.
Economists also will be closely studying new home data, which will be released on Thursday by the Commerce Dept. New homes sales are considered a leading indicator because they are recorded when a contract is signed. Prices of new homes could bottom out before those of existing homes because builders are less sentimental about their properties and are willing to slash prices to move inventory.
Builders, by cutting back on construction, have managed to reduce the number of new homes for sale, though sales transactions are slowing.
"House prices are dropping in more places and dropping at an accelerating rate," said Global Insight economist Patrick Newport. "If you buy a house today, there's a good chance it will be worth less a year from today…The economy is losing jobs. And credit is tight. You add those things together, and the home-selling season this year is going to be another bad one."