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Existing home sales decline

Prices fall by the largest amount in nearly a year

WASHINGTON — Sales of existing homes had a record decline in September while median home prices fell by the largest amount in nearly a year, reflecting deepening problems across the nation in the troubled housing market.

Analysts said the current downturn is already more severe than the housing slump of the 1990s. They predicted that before it is resolved, it will rival the 1980-82 housing slump. Back then, the industry was battered by double-digit mortgage rates and the economy was in a steep recession.

The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September. It was the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was the slowest pace on record.

The median price — the point at which half the homes sold for more and half for less — fell to $211,700 in September, 4.2 percent lower than the sales price a year ago. It was the biggest price drop since last October and marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.

On Wall Street, investors worried about the fall in home sales and credit-related losses at investment giant Merrill Lynch & Co., a development that raised concerns that the housing plunge is dampening corporate profits even more than expected.

After falling by as much as 200 points, the Dow Jones industrial average got a lift on hopes that all the bad news will make an interest rate cut by the Federal Reserve more likely. The Dow finished the day basically unchanged, down 0.98 point at 13,675.25.

Problems in housing worsened in September following a severe credit crunch that hit in August as banks and other lenders tightened standards in the face of soaring mortgage defaults. The market all but dried up for subprime borrowers, those with weak credit histories, and people seeking loans over $417,000.

Many economists said the problems in housing could well last for another year, given record-high levels of unsold new and existing homes.

"The housing market is unraveling," said Mark Zandi, chief economist at Moody's "We are in a steep downturn and the prospects are that it is going to get worse before it gets better."

By region of the country, sales were down 10 percent in the Northeast, 9.9 percent in the West, 7 percent in the Midwest and 6 percent in the South.

The slowdown in sales meant that the inventory of unsold homes rose to 4.4 million units in September. At the September sales pace, it would 10.5 months to eliminate the overhang of unsold homes, a record length of time.

The troubles in housing have been a drag on overall economic growth, increasing worries that the housing slump and related credit market troubles could become so severe that they will push the nation into a recession.