By Timothy R. Homan Nov. 24 (Bloomberg) -- Home resales in the U.S. dropped in October and prices fell by the most on record, signaling a deepening housing recession going into 2009. Purchases of existing homes declined 3.1 percent last month to an annual rate of 4.98 million units, the National Association of Realtors said today in Washington. The median price fell 11.3 percent to $183,300 from a year earlier, the largest year-over-year decrease since records started in 1968. Mounting foreclosures are pushing down home prices and adding to the inventory of unsold houses. Sales may slump further as the worst credit crisis in seven decades makes banks reluctant to offer mortgages. “Underlying demand appears very weak; it seems many sales are coming from cheap prices on foreclosed properties,” said Sal Guatieri, senior economist at BMO Capital Markets in Toronto, whose firm’s forecast of a 4.97 million sales pace was the closest in a Bloomberg survey of 67 economists. “Home sales will continue to fall over the next few months because of tightening credit conditions.” Resales were forecast to fall to an annual rate of 5 million, according to the median estimate in the Bloomberg News survey. Projections ranged from 4.5 million to 5.2 million. Sales dropped 1.6 percent compared with a year earlier. Resales totaled 5.65 million in 2007. Today’s figures compare with the 4.86 million level reached in June, the lowest in a decade and 33 percent below the record reached in September 2005. Resales have fluctuated around a 4.96 million rate this year. Months’ Supply The number of previously owned unsold homes on the market at the end of October represented 10.2 months’ at the current sales pace, up from 10 months’ at the end of the prior month. “The large number of homes already on the market and the number of those that will appear via foreclosure over the next several months only add to the diminished prospects for existing home sales,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said before the report. The median price of an existing home was the lowest since March 2004. Prices fell in all regions of the country, led by the West. Falling home prices make it harder to refinance mortgages and have pushed foreclosure filings up 25 percent in October from a year ago, according to RealtyTrac Inc., the Irvine-California-based seller of default data. Resales account for about 90 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier. Single-Family Resales Today’s report showed resales of single-family homes fell 3.3 percent to an annual rate of 4.43 million. Sales of condos and co-ops declined 1.8 percent to a 550,000 rate. Purchases declined from the previous month in all regions, led by a drop of 6 percent in the Midwest. Sales fell 1.2 percent in the Northeast, 3.2 percent in the South and 1.6 percent in the West. Compared with a year earlier, sales jumped 37.5 percent in the West, while declining in other regions. “Markets where prices have plunged, the buyers are coming back and taking advantage,” Lawrence Yun, chief economist for the Realtors group, said at a press conference. Home sales overall may be weighed down by a federal law that took effect Oct. 1 barring home sellers from providing down-payment assistance to purchasers. Builders Scale Back Builders are scaling back residential projects as home sales decline. Construction of new homes plummeted 65 percent through October from a peak in January 2006. The number of building permits issued last month fell to the lowest level since record-keeping began in 1960, a sign that declines in construction will continue to hurt the economy. Companies are struggling to improve sales alongside a rise in foreclosures. Stuart Miller, chief executive officer of Lennar Corp., the second-largest U.S. homebuilder, said the housing market “continues to decline.” “Clearly the market is weak,” Miller said in comments broadcast from a Nov. 11 UBS conference in New York. “Clearly the supply side of the homebuilding world is dominated by the foreclosures that are coming in faster and more furiously than in the past.” To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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