Tuesday, January 27, 2009
Existing-Home Sales Post Surprising Gain Last Month
The National Association of Realtors reported that sales of existing homes rose to an annual rate of 4.74 million in December, from a downwardly revised pace of 4.45 million in November.
December's sales had been expected to fall to a pace of 4.4 million units. according to Thomson Reuters.
The median sales price plunged to $175,400, down 15.3 percent from $207,000 a year ago.
Analysts saw hope in the apparent pickup in housing sales and attributed the gain to lower mortgage rates.
But they cautioned that the trend would need to continue to represent a real move for the market off its low point.
"This is the first time in a while that we have seen a return to normalcy in the relationship between lower mortgage rates and increased sales. That's good news, but it may be too soon to get really excited yet," said Michael Schenk, senior economist at Credit Union National Association in Madison, Wisc.
"The problem is that the labor markets will weaken going forward. That might not completely overwhelm the effect of lower interest rates, but people are reluctant to buy a home when they think their job prospects are not so great," Schenk said.
The price drop represented the largest decline since the NAR started keeping records and probably the largest since the Great Depression, Lawrence Yun, NAR chief economist told reporters.
Economists looked at the price move as critical toward a possible housing recovery.
"While further liquidations are likely in the months ahead, the price adjustments now underway represent a crucial step toward stabilization of the housing market," David Resler, chief economist at Nomura Securities, wrote in a research note.
Analysts polled by Reuters had expected existing home sales to set a 4.40 million unit pace in December.
That was the lowest price since May 2003 and the biggest year-over-year drop on records going back to 1968.
The sales news lifted shares of home builders broadly, with Hovnanian [HOV 1.71 -0.13 (-7.07%) ] getting a 14 percent spike immediately after the report came out.
"It appears some buyers are taking advantage of much lower prices," said Yun. "The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balance conditions."