Existing Single-Family Home Sales Drop

Not surprisingly, sales of homes have plummeted in many markets:

WASHINGTON (AP) -- Sales of existing single-family homes plunged in 2007 by the largest amount in 25 years, closing out an awful year that saw median prices fall for the first time in at least four decades.

The National Association of Realtors reported Thursday that sales of single-family homes fell by 13 percent last year, the biggest decline since a 17.7 percent drop in 1982. The median price of a single-family home fell to $217,800 in 2007, down 1.8 percent from 2006.
It marked the first annual price decline on records that the Realtors have going back to 1968. Lawrence Yun, the Realtor's chief economist, said it was likely the country has not experienced a decline in home prices for an entire year since the Great Depression.
Private economists said the size of the sales plunge and the decline in prices underscored the severity of the housing slump. Last week, the government reported that construction of new homes fell by 24.8 percent in 2007, the second biggest decline on record, exceeded only by a 26 percent plunge in 1980.

So why is anyone surprised? How much does a 3 bedroom, 2 bath suburban house on a 1/4 acre lot cost in Boca Raton, San Diego, or Scarsdale? Answer: $500,000 to $1 million, if not more. And how many families make the $200,000 or more per year needed to properly afford such a house? Answer: Very few.

Some people in some parts of the country paid too much for houses. Some businesses made mortgage loans to people who overpaid for such houses. Both groups should have to eat their losses. It is ridiculous for the government to force taxpayers who did not make such poor decisions to bail them out.