America: House prices drop 6 percent

American house sales declined in December following several months of stable activity, with total sales in 2007 at the fifth highest on record, according to the National Association of Realtors. The American median house price for all housing types was $208,400 (£105,300) in December, down 6.0 percent from a year earlier when the median was $221,600 (£111,900).

House sales – including single-family, townhouses, condominiums and co-ops – slipped 2.2 percent to a seasonally adjusted annual rate of 4.89 million units in December from a pace of 5.00 million in November, and are 22.0 percent below the 6.27 million-unit level in December 2006.

For all of 2007 there were 5,652,000 house sales, the fifth highest year on record; however, the total was 12.8 percent below the 6,478,000 transactions recorded in 2006.

Lawrence Yun, NAR chief economist, said the market is experiencing uncharacteristic weakness. “Home sales remain weak despite improved affordability conditions in many parts of the country, but we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate,” he said. “Home prices are lower, mortgage interest rates continue to decline and incomes are higher, but many potential buyers are delaying a purchase.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.10 percent in December from 6.21 percent in November. Last week, Freddie Mac reported the 30-year fixed rate dropped to 5.69 percent. “Although interest rates on jumbo loans have fallen somewhat, they remain well above conventional mortgage rates,” Yun said. “It isn’t surprising that the share of single-family homes selling for more than $500,000 fell to 12.4 percent of transactions in December from 14.2 percent a year ago.”

Total American housing inventory fell 7.4 percent at the end of December to 3.91 million homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in November. “The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,” Yun said.

The median single-family house sale price was $206,500 (£104,300) in December, down 6.5 percent from a year earlier.

Regionally house sales in the South slipped 1.0 percent to an annual pace of 1.97 million in December, and are 20.9 percent below December 2006. The median sale price in the South was $173,400 (87,600), down 4.1 percent from a year ago.

House sales in the Midwest declined 1.7 percent in December to a level of 1.16 million and are 20.5 percent below a year ago. The median sale price in the Midwest was $159,800 (£80,700), which is 3.9 percent lower than December 2006.

In the West, house sales fell 2.1 percent to an annual rate of 940,000 in December, and are 24.8 percent below December 2006. The median sale price in the West was $309,800 (£156,500), down 11.1 percent from a year ago.

House sales in the Northeast dropped 4.6 percent to an annual rate of 830,000 in December, and are 22.4 percent below a year ago. The median sale price in the Northeast was $258,600 (£130,600), down 8.9 percent from in December 2006.