Rising Inventory of Unsold Homes
Is Likely to Put Pressure on Prices

(See Corrections & Amplifications item below.)

A continued rise in inventories of unsold homes in August signals further downward pressure on home prices in many parts of the U.S.

Inventories of homes in 18 large metropolitan areas expanded by 3.5% in August, according to data compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data are based on single-family homes and condos included in local multiple-listing services of homes for sale.

The biggest increases included 8% in Orlando, 6.4% in Seattle, 6.1% in San Francisco and 5.6% in Miami.

Of the 18 metro areas, only two showed lower inventories. Boston was down 1.5% and Washington, D.C., 1.6%. Prices have declined modestly in both areas over the past year. For instance, the median home price in the northern Virginia suburbs of Washington was $459,000 in August, down 8% from a year earlier, according to Metropolitan Regional Information Systems Inc., a data-tracking firm in Rockville, Md. Such price declines are likely causing some people who can't get the price they want to take their homes off the market and wait for a recovery.

Home sales have plunged over the past year in many areas where prices had soared over the preceding five years, notably in California, Florida, Arizona, Massachusetts and the Washington, D.C., area. Many potential buyers are waiting for prices to come down further. The persistent weakness in these markets has prompted many housing experts to say prices will have to decline more to revive sales.

Sellers gradually seem to be realizing that they will have to lower prices, says Patrick Lashinsky, a senior vice president at ZipRealty. "There's finally some realism getting into the picture."

Ivy Zelman, a housing analyst at Credit Suisse Group in Cleveland, estimates that prices of newly built homes in San Diego, Sacramento, Calif., Phoenix, northern Virginia and southwest Florida already are down as much as 10% to 15% from a year ago. That estimate includes "concessions" from builders, such as upgraded kitchens or help with closing costs, which are disguised price cuts. But Ms. Zelman still sees more price declines ahead. "We believe that the housing market is still in the early innings of a hard landing that will likely take several years to develop," she says.

Even the National Association of Realtors, normally very bullish on home prices, now predicts a drop in median prices for the nation as a whole. David Lereah, chief economist for the Realtors, forecasts that prices will decline modestly in the next few months. After that dip, he says, prices are likely to resume rising, but at a slower-than-normal rate.

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Corrections & Amplifications:
Inventories of unsold homes listed on multiple-listing services in 18 major metropolitan areas grew 3.5% in August from July, according to data compiled by Zip Realty. In an earlier version, the increase was incorrectly reported as 4.7% because of a calculation error by Zip. The Seattle area was up 6.4% and Dallas was up 0.6%. In the earlier version, the Seattle increase was incorrectly stated as 13% and Dallas as 16%.