• by Erik Sass  @eriksass1, May 16, 2007

Home sweet home it isn't. Existing home sales continued their downward trajectory in the first quarter of 2007, with a 6.6% decline in the annualized rate compared to the same period last year.

On the basis of first-quarter results, the National Association of Realtors is forecasting total sales of 6.4 million. Following an 8.4% month-to-month drop in the annualized rate between February and March--the steepest in 18 years--the year-to-year results are continued bad news for newspaper classifieds, as real estate joins autos and job recruitment categories in a negative-growth trifecta.

NAR also reported a sharp spike in home foreclosures, which rose 62% in April, compared to the same month last year. The wave of foreclosures is being driven by the easy availability over the last several years of "subprime mortgages," granted to aspiring home-buyers with bad credit during the height of the real-estate frenzy. Many subprime borrowers are unable to meet their mortgage payments, due to provisions that resulted in spiraling interest and other fees.

A few regions are faring better than average. The Northeast saw a 1.6% uptick in existing home sales, on an annualized rate. However by the same measure, existing home sales plummeted 11.9% in the West, 7.3% in the South, and 6.1% in the Midwest. In recent years, existing home sales in the West and the South have been the key drivers of the national market.

The first-quarter data suggests newspapers are entering a new phase of revenue declines, as the last area of positive growth in classifieds goes negative, too. Overall in 2006, real-estate classified revenue rose 11.13% compared to 2005--but the softness of the real-estate market was already evident in the last quarter of 2006, when revenues fell 2.26% on a year-over-year basis.

The trend accelerated rapidly in the first quarter of 2007, as big newspaper publishers reported sharp drops in all three classified categories. NYTCO's total classified revenues fell about 10% in the first quarter, Tribune's fell 14%, and McClatchy fell 12%. With an eye to the housing market, McClatchy CEO Gary Pruitt predicted: "As we look to the second quarter, we expect continued declines in real-estate advertising, particularly in the California and Florida newspapers."