Economist says bottom of slump could be near

For Immediate Release On: 10/24/2008

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Martin Crutsinger - Associated Press at

Relevant Info on the Web: http://www.rockymountainnews.com/news/2008/oct/24/september-home-sales-up-55-percent/

Sales of existing homes rose by the largest amount in more than five years in September.

But analysts cautioned against reading too much into the gain, noting that it reflected conditions before the latest upheaval in financial markets increased the likelihood of a recession in the overall economy.

The National Association of Realtors reported that sales of homes rose by 5.5 percent from August to September to a seasonally adjusted annual rate of 5.18 million units - far better than the flat results analysts had expected. On an unadjusted basis, sales were up 7.8 percent from September last year.

Lawrence Yun, chief economist for the Realtors, said there were some glimmers of hope that the bottom of the housing slump may be near. He said that a sales turnaround first seen in California was beginning to broaden to other regions of the country including Colorado, Kansas, Minnesota, Missouri and Rhode Island.

But even with the gain in sales, prices kept falling. The median sales price has dropped to $191,600, down by 9 percent from a year ago.

Analysts said the financial crisis, which has contributed to the biggest upheavals on Wall Street since the 1930s, was sending consumer confidence down, unemployment up and had greatly increased the prospects that the country was either in or about to enter a full-blown recession. All these factors were expected to add to the headwinds buffeting housing in the months ahead.

"In October, mortgage applications sank to six-year lows," said Sal Guatieri, an economist at BMO Capital Markets. "This suggests house sales, like the rest of the economy, fell off a cliff because of the worsening credit crunch."

Many analysts are predicting that home prices - down 18 percent nationally from their peak in mid-2006 - could decline another 10 percent, as a continued glut of foreclosed homes being dumped on the market depresses prices further.

The National Association of Realtors said 35 percent to 40 percent of sales are distressed sales - either foreclosed homes or short sales in which the owner is selling the house for less than the value of the mortgage.

The number of unsold existing homes on the market dropped by 1.6 percent in September to 4.27 million units. That marked the second month in a row inventories have dipped, but the level still represented a 9.9-month supply - about double what's normal.

By region of the country, sales in the West soared by 43 percent, on an unadjusted basis, from September last year, and rose a more moderate 5 percent in the Midwest. In the South, sales dipped 1.2 percent and in the Northeast they slipped 1.4 percent.

About Trenka & Associates: Trenka & Associates is one of Downtown Denver's leading Real Estate Companies. http://www.condosandlofts.com

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