Home prices tumble to 2004 levels

updated 3:12 p.m. ET Nov. 24, 2008

WASHINGTON - Nationwide sales of existing homes fell more than expected last month, as economic fears made buyers leery even though prices plunged to the lowest level in more than four years. And the decline is expected to get worse because October's results reflect sales contracts signed before Wall Street's nosedive.

The National Association of Realtors said Monday that sales of existing homes fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October, from a downwardly revised pace of 5.14 million in September. Sales had been expected to fall to a rate of 5.05 million, according to economists surveyed by Thomson Reuters.

The median sales price plunged 11.3 percent from a year ago to $183,000. That was the largest year-over-year drop on records going back to 1968, and the lowest median sales price since March 2004.

To help stabilize home prices, the Realtors group is calling on lawmakers and the administration of President-elect Barack Obama to spend $50 billion to subsidize lower mortgage rates, projecting that doing so would stimulate about 500,000 more home sales.

"If home prices overshoot downward, then it can lead to collateral damage to the economy," said Lawrence Yun, chief economist at the Realtors group. The cost, he added, would be "very reasonable" compared with the billions the government is spending to rescue major banks.

Since October's sales reflect contracts signed in August and September, sales could well fall further amid the fallout from the recent stock market plunge and sinking economy.

Evelyn Krazer, sales manager with Johnson Realty in St. Louis, said sales activity has slowed down to "practically nothing" in recent weeks.

"Everybody's afraid of losing their job," she said. "People who are thinking about moving are holding off."

Global Insight economist Patrick Newport expects sales to fall next month, possibly to the lowest point of the U.S. housing market bust. More Americans are moving in with relatives after losing their homes to foreclosure, he said, as the economy sinks and lenders tighten their standards.

MORE FROM REAL ESTATE

Real estate Section Front

Foreclosure is a problem for celebrities too Mortage rates fall slightly, but still above record Pending home sales climb in May Foreclosure help available to more homeowners Mortgage applications decline Home prices fall, but trend is easing Reclaiming blighted neighborhoods New-home sales slip, missing expectations Home sales climb, but at a sluggish pace Housing market may return to normal in 2012 Real estate Section Front   Add Real estate headlines to your news reader: