Glut of vacant unsold homes is driving prices down

THE ASSOCIATED PRESS

July 30, 2008

More than 800,000 vacant homes for sale stand between the national 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 down more than 18 percent from its peak in July 2006.

The metropolitan region, which includes Long Island, New York City and parts of New Jersey, Connecticut and Pennsylvania, posted a 7.9 percent decline from a year ago and a .5 percent drop from April, according to the index. The metro region's year-over-year drop was not as precipitous as April's 8.4 percent decline, the biggest for the year so far, and the New York area held onto prices much better than more than half the 20 cities on the list.

"The key thing is the number of unsold homes out there," said Patrick Newport, a economist at Global Insight. "That number has to come down significantly before things can get better." And that won't be until 2010, he predicts.

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.

Staff writer Ellen Yan contributed to this story.