September Existing Home Sales Plummet

by: Roy Mehta

Existing home sales dropped more than economists forecasted in September, as continued problems in the mortgage market forced demand down and supply up. The National Association of Realtors Home reported home resales slid to an annual 5.04 million, an 8% decline from August, and well below economists' estimates of 5.25 million. Single family home sales fell to their lowest levels in 10 years. Inventories rose 0.4% in September to a 10.5 month supply. "The credit freeze in August definitely impacted sales in September, particularly the jumbo [loan] side, so we have seen a large sales decline in the upper end of the market," NAR senior economist Lawrence Yun said. "The good news is that mortgage availability has markedly improved in recent weeks with interest rates on jumbo loans falling." The median existing-home price fell 4.2% to $211,700 in September, down from $220,900 a year ago; the drop follows three months of year-over-year stability. With such bleak figures, many expect the Fed to step in and offer some relief. Lehman Bros. now predicts the Fed will cut its overnight lending rate by a full percentage point to 3.75% by the middle of next year. "The housing crunch is accelerating; the Fed can't stand by and watch," said Ian Shepherdson, chief U.S. economist for High Frequency Economics.

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