From The Wall Street Journal Online
Sales of previously owned homes fell by 2.7% in October as the housing market continues to signal that the boom of the past five years is ringing more hollow these days.
The National Association of Realtors reported Monday that sales of existing homes and condominiums declined by 2.7% last month to a seasonally adjusted annual rate of 7.09 million units. The decline would have been an even larger 3.2% without a spurt in sales in areas where people displaced by the Gulf Coast hurricanes have moved.
Even with the decline in sales, the median price of an existing home sold last month rose by 16.6% to $218,000 compared to the median -- or midpoint -- price in October 2004.
"This signals that the housing sector has likely passed its peak. The boom is winding down to an expansion," said David Lereah, chief economist for the Realtors.
The 2.7% drop in sales of existing homes would have been a larger 3.2% decline without a boost in activity from people relocating after Hurricanes Katrina and Rita devastated the Gulf Coast. The boost in sales outside of the hurricane areas offset sales declines in cities hardest hit by the storms.
Sales surged by 83% in Baton Rouge, La.; 32% in Mobile, Ala., and 14% in Houston. By contrast, sales were down 42% in New Orleans and 44% in Beaumont, Texas.
Mr. Lereah predicted that housing activity would cool further in coming months if, as expected, the Federal Reserve keeps pushing interest rates higher to combat rising inflation pressures that have been triggered by a surge in energy prices.
Those price increases have contributed to a rise in mortgage rates although rates retreated a bit last week to 6.28% from 6.37% the previous week, which had been the highest level in two years.
"We feel confident that housing is landing softly as rates continue to rise," Mr. Lereah said.
Some economists had expressed fears that rising mortgage rates could burst the housing bubble much as a speculative bubble in Internet stock prices burst in early 2000, sending shockwaves throughout the economy.
The 16.6% increase in the median sales price was the biggest year-over-year price increase since a 17.2% jump in July 1979.
By region of the country, the biggest sales decline in October occurred in the Northeast, a drop of 7.4%. Sales were down 1.9% in the Midwest and 1.2% in the West. Sales were down 1.8% in the South despite the big gains in areas where displaced homeowners relocated.