Sales of existing single-family homes decrease by 13%

Sales of existing single-family homes decrease by 13%

The 2007 decline is the worst since a 17.7% drop in home sales in 1982.

Martin Crutsinger / Associated Press
WASHINGTON -- Sales of existing single-family homes plunged in 2007 by the largest amount in 25 years, closing out an awful year that saw median prices fall for the first time in at least four decades.

The National Association of Realtors reported Thursday that sales of single-family homes fell by 13 percent last year, the biggest decline since a 17.7 percent drop in 1982. The median price of a single-family home fell to $217,800 in 2007, down 1.8 percent from 2006.

It marked the first annual price decline on records that the Realtors have going back to 1968. Lawrence Yun, the Realtor's chief economist, said it was likely the country has not experienced a decline in home prices for an entire year since the Great Depression.

Private economists said the size of the sales plunge and the decline in prices underscored the severity of the housing slump. Last week, the government reported that construction of new homes fell by 24.8 percent in 2007, the second biggest decline on record, exceeded only by a 26 percent plunge in 1980.

"We are closing the book on the worst year for housing possibly since the Depression," said Joel Naroff, chief economist at Naroff Economic Advisors. "I keep thinking a bottom is near, but we haven't gotten there yet."

The year ended on an exceptionally weak note, with total sales of both single-family homes and condominiums dropping by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units.

David Wyss, chief economist for Standard & Poor's, said he believed sales of existing homes would continue declining until the middle of this year with prices probably falling for all of 2008.

"When you look at the inventory levels, there are just a lot of unsold homes on the market that we have got to get rid of," Wyss said.

The report showed the inventory of unsold homes did fall 7.4 percent to 3.91 million units in December, but part of that probably reflected disappointed homeowners just taking their houses off the market.

The 13 percent drop in single-family home sales last year followed an 8.1 percent decline in 2006 that occurred after sales had set record highs for five straight years.

That housing boom fueled a speculative frenzy in many parts of the country, luring many investors into the market hoping to buy homes and flip them for quick profits as home prices in those areas soared at double-digit rates.