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Recent data shows that home sales have declined dramatically last month. Furthermore, housing prices posted their sharpest decline in four decades. This was caused by a rapidly slowing economy that discouraged many potential buyers from entering the market. Sales of existing homes declined 8.6 percent last month, according to the National Association of Realtors, a trade association. The median price of a home fell 13 percent in November, to $181,300 from $208,000 a year ago. This is the lowest price since February 2004. It looks like the trouble with the housing market are only multiplying as the broader economy deteriorates.
Even if the mortgage rates dropped after the Federal Reserve slashed interest rates to record lows near zero percent, analysts say that housing would continue to lag as unemployment increases and waning industrial growth continues. In addition, the Commerce Department reported on Tuesday that the gross domestic product declined at an annual rate of 0.5 percent in the third quarter as corporate profit fell 1.2 percent. The data shows that the pool of unsold homes grew slightly to 4.2 million last month. At the current sales rate, it would take about a year to burn off the excess inventory, which is up from a 10.3-mont supply in October.
Disturbing as it seems, the Commerce Department also reported that the new home sales dropped to a seasonally adjusted annual rate of 407,000 in November, from a downwardly revised rate of 419,000 in October. Housing values have plummeted since the peak of the market in July 2006, when the median home price was $230,200. However, some economists say that home prices will fall even farther before they dip low enough to entice potential home buyers. It remains to be seen how these predictions will fullfill and affect the US citizens.
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