Home Sales and Prices Continue Downward Despite Affordability Measures

Home sales have been mixed recently, continuing to erode in the new-home market while stabilizing in the existing-home market. But existing-home sales are simply reflecting rising foreclosures and foreclosure sales, a process that’s actually putting heavier downward pressure on the new-home market, the National Association of Home Builders reports.

NAHB’s surveys of home builders have yet to show stabilization of either net home sales or sentiment regarding the demand side of the market for new single-family homes.

Weak demand and heavy oversupply continue to put substantial downward pressure on house prices, at least on a national-average basis. Median prices of new and existing homes sold continue to trial downward while prominent repeat-sales measures are falling sharply.

The S&P/Case-Shiller 20-city composite home price index fell at a 19 percent seasonably adjusted annual rate in April and was down by 17 percent from its mid-2006 peak.

Price-to-income ratios now have fallen back toward normal historical ranges and standard measures of housing affordability have picked up a good bit from their mid-2006 lows. However, tight mortgage lending standards and expectations of further house price declines have kept prospective home buyers on the sidelines.