- The Washington Times - Wednesday, July 30, 2008

NEW YORK | More than 800,000 vacant homes for sale stand between the housing recession and the bottom. And that glut is driving down home prices, slowing sales and turning consumer psychology against the market.

New figures out Tuesday showed home prices fell by a record 15.8 percent in May from a year ago, with none of the 20 cities surveyed registering a price gain. The Standard & Poor’s/Case-Shiller Home Price Index is now down more than 18 percent from its peak in July 2006.

In fact, nine cities posted record declines, including Miami near where Sharon McKenney, 55, and her husband are trying to sell their four-bedroom, waterfront home.

They were asking $550,000 for their home in Palmetto Bay, a bargain, Mrs. McKenney thought, compared with neighboring properties listed around $625,000. But there have been no offers, so they cut the price to $545,000.

“I’m frustrated, however I still feel like it’s priced very well, and I don’t see myself lowering it,” Mrs. McKenney said. “The thing of it is, there’s so many [homes] on the market, people keep thinking, if they keep looking they’ll find something better, something cheaper.”

Tuesday’s home price figures follow a litany of pessimistic housing reports and financial results from builders and lenders. The pace of existing home sales is the slowest in a decade, and roughly one out of every five sold is a foreclosure. Consumer confidence data released Tuesday, while breaking a six-month fall, also remains near 16-year lows.

“The key thing is the number of unsold homes out there,” said Patrick Newport, a U.S. economist at Global Insight. “That number has to come down significantly before things can get better.”

And that won’t be until 2010, he predicted.

About 2.1 million homes were vacant and on the sales block at the end of the second quarter. In normal times, there would be only 1.3 million homes for sale.

That gulf, swollen by overbuilding and an abnormally high number of foreclosures, could widen further through next year. Nearly 2.8 million U.S. households will either face foreclosure, turn over their homes to their lenders or sell their houses for less than the mortgage’s value by the end of next year, according to Moody’s Economy.com.

That number even takes into account the estimated 400,000 homeowners who could benefit from the housing bill President Bush is expected to sign this week. It goes into effect Oct. 1.

While regarded as the most significant housing legislation in decades, many think it’s too little, too late.

“This isn’t going to put the bottom in the housing market by any means. It’s not a big enough package to deal with continued foreclosures and the fact that housing prices have not yet bottomed,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank.

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