Existing Home Sales Up Slightly

WASHINGTON (AP)-- Sales of existing homes posted a small increase in October but the median home price fell by a record amount. Analysts forecast more price declines in the coming months as the housing market undergoes a correction.

The National Association of Realtors said Tuesday that existing home sales edged up 0.5% to a seasonally adjusted annual rate of 6.24 million last month. It was the first increase after seven consecutive monthly declines.

However, the median price for a home sold dropped to $221,000 in October, a decline of 3.5% from a year ago. That was the biggest year-over-year price decline on record.

David Lereah, chief economist for the Realtors, said he expected home prices to continue falling for the rest of the year as sellers accustomed to the recent booming market, reluctantly cut their prices.

"After a period of price adjustments, we'll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007," he said.

Meanwhile, prices for single-family homes across the U.S. grew at the slowest pace in more than nine years, a national real-estate indicator showed.

The average price rose 3.7% in September from the previous year, the slowest since July 1997, when the gain measured 3.5%, according to S&P/Case-Shiller composite index.

The growth rate was sharply below the 16% rise a year ago and the 20% uptick in September 2004.

The index also dipped nearly 0.4% from August 2006, the third straight monthly decline.

"Home price gains continue on a downward spiral," said Chief Economist Robert Schiller at MacroMarkets LLC. "In September we saw montly declines or flat prices in seven of 10 major metropolitan areas."

The once-booming housing market, which had been one of the economy's standout performers for the past five years, has experienced a significant slowdown this year, which has dragged down overall economic growth.

Some analysts have worried that the correction in housing could drag the county into a recession. However, those fears have eased in recent months as a big fall in gas and other energy prices has provided support for consumer spending.

For October, sales were down 2.9% in the Northeast and 1.2% in the South. However, they rose by 6.4% in the West and were unchanged in the Midwest.

The inventory of unsold homes rose by 1.9% in October to 3.85 million units, the second highest total on record. It would take 7.4 months to exhaust the backlog of unsold homes at the October sales price.

Analysts predicted further price declines with inventories of both existing and new homes hovering near record levels.

By region of the country, median prices were down the most in the South, a drop of 7% followed by declines of 5.2% in the Northeast, 1/2% in the Midwest and 0.6% in the South.