The latest evidence of a decaying real estate market came in a government report Thursday that new-home sales in August hit their lowest point in seven years.
But for a more vivid illustration, look at Akron, Ohio. In 10 of that city's hard-hit neighborhoods, a report given to the city council this week said 79% of all homes sold from February to August this year were unloaded by lenders for a fraction of their value. In Akron, as elsewhere in the USA, the dumping of foreclosed homes on the market has squeezed both builders and sellers who must compete against additional properties.
Last month, as builders slashed prices and held "deal of the century"-style blow-out sales to move unsold inventory, the median-price new home fell to $225,700, a 7.5% decline. That was the largest percentage drop in 37 years.
"This is just hideous," said Ian Shepherdson of High Frequency Economics. "Housing is nowhere near bottom; neither is its wider impact."
With a bloated eight-month supply of new homes for sale, it's clearly a buyer's market. Yet, many would-be buyers are having a harder time qualifying for a mortgage. The average rate on the 30-year fixed-rate mortgage crept up to 6.42% this week, according to Freddie Mac.
Loans for people with tarnished credit have virtually vanished. Lenders are demanding higher down payments and more proof of income and assets. And rates for "jumbo" loans -- those above $417,000 -- are hovering near 8%.
From July to August, sales of newly built homes fell 8.3%, to a seasonally adjusted pace of 795,000, the Commerce Department said. That's down 21% from August of last year.
"The big thing that's happened here is the progressive meltdown of the mortgage finance system," says David Seiders, chief economist for the National Association of Home Builders (NAHB). Seiders doesn't expect home sales to hit bottom before early next year.
In an NAHB survey this month, 62% of builders said the mortgage crisis was having some or a substantial impact on their business, up from 33% in March.
Underscoring that point, KB Home said Thursday that it lost nearly $36 million in its fiscal third quarter, and that 58% of buyers canceled their contracts.
"We see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins," says Jeffrey Mezger, CEO of KB Home. "Rising foreclosure rates are intensifying surplus inventory and will likely drive further home-price reductions."
The National Association of Realtors, which reported Tuesday that sales of existing homes fell last month to their lowest point in five years, expects more dismal figures for September, given the crisis in the mortgage industry.
This week, Foxtons, a real estate company in West Long Branch, N.J., said it will close because of the slumping housing market and lay off 350 of its 380 workers, The Asbury Park (N.J.) Press reported.