Reports released this week confirm that the housing market remains extremely weak. The volume of home sales may have reached a bottom, but at a very low level and unlikely to rise in the near future. Yesterday the National Association of Realtors announced data on existing home sales in February. For the sixth consecutive month, sales were roughly on an annual pace of five million units. In the four boom years, 2003 through 2006, the average pace of monthly sales was 6.6 million units. The supply of existing homes for sales remains extremely high: 9.2 months for single family homes and a staggering 13 months for condominiums. In the Chicagoland area, home sales were down 26.9% from a year earlier despite this February having a 29th and despite the fact that suburban Will County was the fastest growing county in the entire country last year.
Home prices are falling drastically. The national median price for an existing home dropped to $195,900, which, on an inflation adjusted basis, means that prices have fallen all the way back to March 2003. The private Case Shiller Index of home prices in 20 metropolitan areas dropped a record 10.7% between January 2007 and January 2008. Home values increased in only one of the 20 areas year-over-year, and prices have fallen everywhere in recent months. In some places, the declines in home prices are truly mind-boggling. Prices in sunny San Diego are down 16.7% from a year ago, 20.2% from two years ago, and 15.5% from three years ago. Prices in Detroit, starting from a much lower base, are down 15.1% from a year ago, 20.9% from two years ago, and 18.6% from three years ago. The Wall Street Journal reported this morning that the average sale price for a home in the city of Detroit was just $22,000.
The bright spot is that prices may be low enough to begin attracting buyers, but even if the recovery is starting, it will take a long time to come to fruition. The Journal also reports that nearly 500,000 foreclosed homes are on the market, more than double from a year earlier. Foreclosed homes represent one in nine homes listed for sale nationally compared to one in 15 last year.