Home Prices Drop; Home Sales Rise in July

Aug. 26, 2008— -- Plunging housing prices have wreaked havoc on the economy as the median price of a home in the United States has fallen 6.3 percent from last year, leaving many families financially crippled.

Home prices dropped in all 20 of the nation's major metropolitan areas, with the worst declines coming in the Sun Belt cities of Las Vegas, Miami and Phoenix, which were once red hot. The three cities have seen home prices drop nearly 30 percent since last year.

But numbers from the Commerce Department released today were seen by some as a possible signal that the worst had passed. With home sales up 2.4 percent in July, the increase of up to 515,000 units sold was the highest jump since April.

June Weiner, a Minneapolis real estate broker, said that buyers, lured by the prospect of a bargain, are nibbling again. The asking price on a house in one Minneapolis community dropped $7,000 in two months, Weiner said, creating an opportune time for buyers.

But even though July's uptick in sales sounds like promising turnaround, some economists say that the figures do not accurately reflect the portrait of housing in America. While prices are falling, the supply of unsold homes is rising.

John Silvia, a chief economist at Wachovia, noted that the housing recovery is far from over.

"It's very premature to read this as a national housing recovery stabilization period," he said. "There are some regions that are doing better, but housing is still struggling."

Silvia said that as many as 40 percent of reported home sales have been on properties in foreclosure.

"When you dig down into the home sales numbers, home sales rising would particularly be a good number," Silvia said. "Except that a lot of those sales are probably foreclosures. And that's why you get this interesting combination of higher sales."

An improvement in consumer confidence and job growth will be a better signal that America's housing market is healthy, Silvia said.

"I would suspect the national turnaround in housing is not until the spring of 2009, the summer of 2009," he said.

For Americans hampered by job worries, rising prices and poor credit, many obstacles persist to becoming a home buyer. Instability in the market, coupled with the inability of the Federal Reserve to lower interest rates for fear of inflation, indicates continued weakness for many months.