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Market watch

Housing industry analysts predicted the subprime mortgage crisis would affect home sales in September. By all accounts, they were right. Existing home sales in Florida plummeted 38% in September compared to a year ago, with 8,688 single-family homes changing hands. The median price fell 9% to $243,300. Sales of existing condominiums also decreased last month, with 2,557 condos sold statewide compared to 4,032 in September 2006 for a 37% decline. The statewide median sales price for condos was $194,200, down 4% from a year ago.

• Nationally, single-family home sales dropped 8.6% to a seasonally adjusted annual rate of 4.38 million in September from a pace of 4.79 million in August, and are 19.8% below the 5.46 million-unit pace in September 2006. The median existing single-family home price was $210,200 in September, down 4.9% from a year ago. Existing condominium and co-op sales fell 4.3% to a seasonally adjusted annual rate of 660,000 units in September from 690,000 in August, and are 14.7% below the 774,000-unit level in September 2006. The median existing condo price was $221,700 in September, up 1.4% from a year ago. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year,” says NAR Senior Economist Lawrence Yun. “One out of 16 American households is buying a home this year.”
• Contrary to analysts’ expectations, sales of new homes nationwide rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported last week. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August, an 11-year low. Sales of new homes are down 23.3% in the past year. The sales figures do not account for canceled sales contracts, which have surged in recent months. Builders have reported cancellation rates as high as 68%. The median price of a new home rose 5% in September to $238,000.
• Homebuilders weigh in on housing trends. Tighter lending standards and reduced availability of credit will complicate—but not derail—a national recovery in the housing market, according to the National Association of Home Builders' (NAHB) state and metro economic forecast [http://housingeconomics.com]. The impact on housing markets will come in two forms, says NAHB Chief Economist David Seiders. First, tightened lending standards have already reduced the availability of loans overall and raised the price to riskier borrowers. A second effect, with the potential for a persistent cycle of defaults and price declines, will depend on the level of exposure to these loans, the current house price environment and the strength of the local economy.
• Bright spot. This week, the U.S. Commerce Department is expected to report that the U.S. economy grew by at least 3% in the third quarter, which would meet what economists deem the country's natural growth rate. With the exception of the housing market, much of the economy has shown little need for a boost from cheaper loans. Still, investors expect the Federal Reserve to lower the benchmark federal funds rate to 4.5% later this week as a preventive measure to head off a more serious downturn. Fed Chairman Ben Bernanke has reiterated on several occasions that declining home prices—coupled with other problems such as tightening credit markets and rising oil prices—could undermine other parts of the economy, warranting stronger action by the Fed.