Housing Prices Collapse at Near-Depression Pace

Dec. 23 (Bloomberg) -- Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing hopes that the market was close to a bottom.

Purchases of both new and existing houses dropped 7.6 percent, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said.

“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

The figures were worse than economists had forecast and signal that the battered housing market that led the economy into a recession may be taking another lurch down. Sliding property values mean more Americans will be under water on their mortgages, destroying household wealth and undermining consumers’ purchasing power.
resident-elect Barack Obama plans an unprecedented economic stimulus to restore growth, and pledged on Dec. 13 to limit foreclosures. One tenth of U.S. families who own a home are in financial distress, Obama said.

“We need desperately to get this economy moving,” Vice President-elect Joseph Biden, who is leading the incoming administration’s initiative to bolster the middle class, told reporters before a meeting with Obama’s economic advisers today. Transition officials are “getting very close” to an agreement with lawmakers on the size of the stimulus, Biden said.

Below Estimates

The Realtors’ figures showed home resales, including condos, fell 8.6 percent to an annual rate of 4.49 million, below all but one estimate in a Bloomberg News survey of 63 economists. The median resale price dropped to $181,300.

Separately, the Commerce Department reported that new- home sales fell 2.9 percent last month to a 17-year low of 407,000. The median sales price declined 11.5 percent from a year earlier to $220,400.

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