Buyers have been hoping for it and sellers have been dreading it but home prices have apparently started a long-expected decline while existing home sales continued their five month slide.

On the price front the change is not dramatic, at least not yet. The monthly survey conducted by the National Association of Realtors reported that existing homes sold nationwide during the month of August had a median price of $225,000. The revised median price for July was $230,000. In August 2005 the median price was $229,000 thus the year-over-year price changed -1.7 percent. According to The New York Times, this was the first time since April, 1995 that house prices were lower than reported the same month one year earlier. (A median price is one at which half of the houses in the study sold for less and one half for more.)

Sales of existing homes, a category which covers single-family, condos, co-ops, and townhouses were down 0.5 percent to a seasonally adjusted annual rate of 6.30 million units in August from the annual rate of 6.33 million the previous month. Sales were off of the August 2005 level of 7.21 million units by 12.6 percent but that month was the second highest since NAR has been keeping records, a hard pace to maintain.

Inventories of unsold houses have climbed appreciably in the last year. At present there are 3,918,000 unsold homes on the market. This does not include new construction. At the present absorption rate this is a 7.5 months supply. In July there was a 7.3 months supply and one year ago 2,841,000 homes were available - a 4.7 month backlog. The inventory has increased 1.5 percent in sheer numbers since last month but as sales have slowed the attrition rate has increased 2.7 percent. When compared to August of 2005 the inventory is 37.9 percent higher and will take nearly 60 percent longer to sell.

A bit of good news in home sales; single family homes sold at a seasonally adjusted rate of 5.51 million in August which was unchanged from the July figure and down only 1.7 percent from August 2005. Condo and co-op sales, however, fell 3.5 percent to a seasonally adjusted rate of 793,000 units and were 14.5 percent lower than one year ago.

The West suffered the biggest setback in sales; down 2.3 percent (seasonally adjusted) from July and 22.8 percent compared to last August. However, the median sale price of $345,000 was actually up a fractional 0.3 percent over last year. This appears to be a situation where sellers are refusing to reduce their prices even if it means a prolonged selling period. Other media reports indicate that California is driving figures for the West. For example, DataQuick, a firm that monitors real estate activity nationwide, reported that sales in California were up 12.5 percent in August over July but were down 25.1 percent from August 2005 figures. The median price for a home in California in August 2006 was $472,000, down 0.6 percent from July but up 3.5 percent from $456,000 in August 2005.

Sales in the Northeast and the Midwest were actually up from July; 1.9 percent and 0.7 percent respectively although both regions were off of the August 2005 pace by a little over 11 percent. The Northeast region was most affected price wise with median sales prices off 3.9 percent from last year. The Midwest was down 1.1 percent and the South 2.6 percent.

NAR, of course, put its best spin on the August report referring to the numbers as an indication that existing home sales were stabilizing "at a sustainable pace."

David Lereah, NAR's chief economist said home sales appear to be leveling out. "After a stronger than expected drop in July." (Preliminary figures that month reported that existing house sales had dropped 4.1 percent to an annual rate of 6.33 million units.) "The fairly even sales numbers in August tell us the market is at a more sustainable pace. It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build up in the inventory of homes on the market."

The Commerce Department in conjunction with the Department of Housing and Urban Development usually issues their joint new home sales report the day before or the day after the existing home report but so far it has not materialized. We will do a short review when it does.