Home prices down and unsold listings way up

The big news in the April existing home price report released today by the National Association of Realtors wasn’t the 8% drop in median home prices or the better-than-expected 1% decline in sales.

It was the eye-popping 10.5% jump in the inventory of unsold homes. The number of homes available for sale jumped to 4.55 million at the end of April, representing an 11.2-month supply at the current sales pace. There was a 10-month supply of homes at the end of March.

“The increase in inventories is a bad sign for the next several months,” Bill Hampel, Chief Economist for the Credit Union National Association and Affiliates, said after the data was released. “It means we’re not out of woods yet.”

There’s no shortage of bad signs. On May 22, the closely-watched Office of Federal Housing Enterprise Oversight’s home price index posted a 3.1% decline in home prices for the first quarter compared to a year ago – the biggest drop in the index’s 17-year history.

The drop was significant because, unlike other measures, the OFHEO purchase-only house price index tracks conforming loans of no more than $417,000, which are owned or backed by Fanny Mae and Freddie Mac. What it doesn’t include are homes financed with the risky subprime loans and jumbo mortgages (for more expensive home purchases).

“If the OFHEO index is showing weakness — and it is the least likely to show a home price decline — then there is serious downward pressure on prices,” Hampel said.

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