Existing home sales' plunge continues

By MARTIN CRUTSINGER, Associated Press Read Comments-->11/29/2007 -->
WASHINGTON -- Hit by a severe credit crunch, existing home sales fell for the eighth straight month with median home prices dropping by a record amount.
The National Association of Realtors reported Wednesday that sales of existing homes dropped by 1.2 percent last month to a seasonally adjusted annual rate of 4.97 million units. That represented the slowest sales pace on record going back to 1999 and was 20.7 percent below activity a year ago.
The median price of a home sold last month, the point where half the homes sold for more and half for less, declined to $207,800, a drop of 5.1 percent from a year ago, the biggest year-over-year price decline on record.
The October weakness was blamed on the fallout from a serious credit crunch that roiled financial markets in August. Banks and other lenders have tightened credit standards in response to a soaring level of defaults, especially on subprime mortgages -- loans provided to borrowers with weak credit histories.
Analysts predicted that prices will have to drop further to work down historic levels of unsold homes. They said the housing slump could last for another year.
"The light at the end of the housing meltdown tunnel appears to be an oncoming train," Joel Naroff, an economist with Naroff Economic Advisors, said in response to the new figures. "With so many choices and so few buyers, the median price is cratering."
Wall Street, however, took the latest bad news on housing in stride, preferring to focus instead on comments from Federal Reserve Vice Chairman Donald Kohn that were interpreted as offering the hope of further Fed rate cuts.
Kohn said the central bank would need to be "nimble" in setting monetary policy. He noted in a speech in New York that the recent financial market turbulence had undone some of the improvements that had been seen and increased the risk of "especially adverse outcomes" for the economy.