Existing-home sales in region fell 30 percent in April

Sales of previously owned homes in the Philadelphia region continued to decline in April, falling more than 30 percent from the same month in 2008.

By contrast, volume inflated by foreclosures and short sales last month in the West and South yielded sales nationally just 3.5 percent below the April 2008 level, the National Association of Realtors reported yesterday.

Though the national numbers seem better than the region's, both reflect continued weakness in demand - so weak that the stock of existing houses for sale rose to 3.7 million nationally (a 10.2-month supply) and 47,424 locally (9.1 months).

A big price drop in 10-year Treasury bills unexpectedly boosted yields and pushed fixed-mortgage rates up almost three-quarters of a percentage point yesterday, which is not likely to stimulate demand.

If rates continue to rise and "shadow inventory" - houses that people want to sell, but have pulled from the market until conditions improve - reappears for sale, recovery will be postponed, said Kevin Gillen, a Wharton research fellow and vice president of Econsult in Philadelphia.

TD Bank N.A. chief economist Joel L. Naroff said, "We are, at best, just in a stabilization phase. The recovery and decent-growth phases will not likely show up for quite some time."

A year ago, there were 4,000 more houses for sale in the Philadelphia region, a 7.2-month supply, but it took, on average, 12 fewer days to sell one. This April, time on the market averaged 93 days, according to Prudential Fox & Roach's HomExpert Market Report, based on Trend Multiple Listing Service data.

In general, two competing forces - distressed sales and weak demand - drive existing-home transactions, said Patrick Newport, housing economist for IHS Global Insight Inc. Distressed sales push volume up; weak demand pulls it down.

"Weak demand has been winning this tug-of-war in recent months," Newport said.

About 45 percent of existing-home transactions nationwide in April were foreclosures or short sales, in which the lender accepts less than what is still owed.

In the 12 months ended March 31, foreclosures accounted for just 3.7 percent of sales in this region, and short sales 8.2 percent, the search engine Zillow.com reported.

Though there is more optimism in this market than there was six months ago, it has not yet been cashed into a sales boom, Main Line broker John Duffy said.

With sales numbers falling consistently in the last four months and inventory and average days on the market rising, the bottom of the decline might be a couple of quarters or more away, economists say.

Gillen said his research showed that 18,000 existing houses change hands every three months in the region. In the first quarter of this year, just 8,732 houses were sold, two-thirds fewer than at the market's peak in mid-2005.

The market for million-dollar houses has taken a big hit, especially since the nation's financial meltdown in October. That segment grew from 2000 to 2005 to a regionwide high of nearly 250 sales per quarter. Quarterly sales averaged about 163, Gillen said, in research supported by Prudential Fox & Roach.

In the first quarter of 2009, there were just 58 million-dollar-plus sales in the region, he said. Currently, there are about 800 houses for sale in that range.

What is selling is going for "probably 8 to 10 percent lower than list price," Duffy said. "But . . . some might not be priced properly."

Among the factors affecting sales at the high end is a diminished number of corporate relocations here over the last year. "Companies are really hunkering down," Duffy said. "We're not even seeing relos in lower price ranges."

Gillen calculates the region's median price at $190,000, about what it was in the fourth quarter of 2004 and about 14 percent below the mid-2005 market peak.

Still, with high sales volume in distressed housing markets pushing prices to their bottom faster, low sales volume here may postpone a market resurgence.

Philadelphia lagged the rest of the country during the 1987-88 housing collapse, veteran brokers recalled. When the downturn hit here, prices tumbled 30 percent or more.

"Homes did not recover their 1987 values until 1997," broker/developer Allan Domb said.

Gillen said this area might be in for further depreciation, "but I'd like to think that most of the price declines are behind us."

"Realtors like to joke that you don't try to catch a falling knife," he said. "But if either interest rates or inventories show any significant increases in the remainder of this year, our falling knife could turn into a falling chain saw."