‘Pop goes the bubble’: Housing prices drop

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 turnaround 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.

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.

Last year, when the five-year 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.