Home prices down for first time in 11 years, but not in San Antonio.

Web Posted: 09/25/2006 10:08 PM CDT

Martin Crutsinger
Associated Press

WASHINGTON — Annual existing-home prices declined in August for the first time in more than a decade as sales fell for a fifth straight month.

The year-over-year drop in median sales prices represented a dramatic turn in fortunes for the once high-flying housing market, which last year was posting double-digit price gains.

"Pop goes the housing bubble," said Joel Naroff, chief economist at Naroff Economic Advisors. He predicted prices will tumble farther as home sellers struggle with a record glut of unsold homes.

The National Association of Realtors reported Monday that sales of existing single-family homes and condominiums dropped 0.5 percent last month to a seasonally adjusted annual rate of 6.30 million units. That was the fifth straight monthly decline and left sales 12.6 percent below the pace of a year ago.

In San Antonio, however, home prices continue to rise and the inventory of homes on the market remains low.

The median price of an existing home this year rose to $142,300, up 9 percent over last year's January-August median price of $130,900, according to new data from the San Antonio Board of Realtors.

San Antonio has about a four-month supply of homes, which means it would take four months to sell homes still on the market at the current pace.

While San Antonio's housing market has been strong, appreciation has averaged only a steady 4 or 5 percent a year until the past year, when prices started to rise more sharply.

Nationally, the slowdown in sales meant that the inventory of unsold homes rose to a record 3.92 million units at the end of August. At last month's sales pace, it would take 7.5 months to clear out the backlog of unsold homes, the longest stretch since April 1993.

The median price of a home sold last month fell to $225,000. That was down 2.2 percent from July and down 1.7 percent from August 2005. That marked the first year-over-year drop in home prices since a 0.1 percent fall in April 1995.

In 2005, when the five-year national housing boom was reaching its peak, median prices posted a string of double-digit gains on a year-over-year basis. The median price is the point where half the homes sell for more and half for less.

David Lereah, chief economist for the Realtors, predicted price declines would continue for the rest of this year as sellers adjust asking prices in light of the inventory glut.

"This is the price correction we've been expecting," Lereah said. "With sales stabilizing, we should go back to positive price growth early next year."

The drop in existing-home sales in August was not as steep as expected, and some said the recent declines in mortgage rates may help keep the housing market from falling off a cliff.

Bolstered by the lowest mortgage rates in more than four decades, housing set sales records for both new and existing homes for five consecutive years through 2005. However, this year analysts are forecasting that sales are likely to fall 10 percent.

The worry is that the decline could become so severe that it would mirror the bursting of the stock market bubble in 2000, which helped push the country into a full-blown recession.

Richard Fisher, president of the Dallas Federal Reserve Bank, said in a speech Monday that housing was in a "serious correction," and that it and falling auto sales represented the economy's major weak points.

Express-News business writer Jennifer Hiller contributed to this report.
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