Home prices fall in August, stocks flat


Prices come down as home inventories grow to largest levels since 1993. More price declines may be ahead. Crude oil falls under, then rallies back above $60. Altria's 5% decline drags Dow lower as class-action suit over 'light' cigarettes is certified.

Home prices are starting to fall, something not seen in more than 11 years, the National Association of Realtors said today.

The median price of a home in August was $225,000, down 2.2% from $230,000 in July and down 1.7% from $229,000 a year ago. This was the first month-to-month price decline since April 1995.

Home sales continued to weaken from overheated levels of a year ago, the association said. Existing home sales were running at a seasonally adjusted annual rate of 6.3 million units, down slightly from 6.33 million units in July and down 12.6% from a year ago.

Inventories, meanwhile, grew 1.5% to 3.92 million units, a 7.5-month supply and the biggest supply since April 1993.

While 2006 will be third-best year ever in terms of the number of homes sold, prices will continue to fall over the next few months as the inventory build-up is worked off, said David Lereah, the chief economist of the organization.

The biggest price decline was in the South, where the median price fell 4.5% to $184,800 in August from July. Over the last year, the price decline was steepest in the Northeast, down 5.5% to $277,100.

The sales decline from July to August was limited to Western states -- basically all states from Colorado to the West Coast. Statistics from that region are dominated by sales in California. On a year-to-year basis, sales are down across all of the country. In the West, the decline is more than 22%.

After the home sales report was released, stocks gave up gains seen right after the opening. At 11:20 a.m., the Dow Jones industrials were unchanged at 11,508. The Standard & Poor's 500 Index was barely higher at 1,315, and the Nasdaq Composite was up four points to 2,223.

But only seven Dow stocks were lower. The blue-chip index, in fact, was dragged lower primarily by cigarette maker Altria (MO, news, msgs). The stock was down 5% after a federal judge in New York granted class-action status to tens of millions of smokers of "light" cigarettes for a potential $200 billion lawsuit against tobacco companies.

The lawsuit alleges that cigarette makers, including Altria's Phillip Morris, duped smokers with light cigarettes and responded to consumers' mounting health concerns with a campaign of deception designed to preserve revenue. Altria said it would appeal the certification by Judge Jack Weinstein.

An early market rally was fueled by a drop in energy prices. Oil prices fell under $60 a barrel in overnight trading with crude in New York bur rallied above $60 to $60.40, down just 15 cents at 11:20 a.m. ET.

The decline comes as prices at the pump continue to fall. The Lundberg Survey said the national average price for self-serve regular unleaded gas was $2.4245 a gallon as of September 22, down 23.53 cents per gallon in the past two weeks, according to the survey of about 7,000 gas stations