Finance Globe

U.S. financial and economic topics from several finance writers.
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December Existing Home Sales Drop as Expected

Sales of existing homes fell in December after a rising surge from September through November. The drop was expected after a rush of buyers raced to meet the original tax credit deadline in November, the National Association of Realtors reported today.

However, home prices rose from December 2008 and annual sales in 2009 improved. There were 5,156,000 existing home sales in 2009, 4.9% higher than the 4,913,000 homes sold in 2008. 2009 showed the first annual gain in sales since 2005.

December 2009 sales of existing homes, including single-family, townhomes, condos, and co-ops, fell 16.7% to a seasonally-adjusted rate of 5.45 million units from the November pace of 6.54 million units. The figure is 15% above the 4.74 million-unit level from December 2008.

At the December sales pace, the total housing inventory of 3.29 million homes represents a 7.2-month supply of homes for sale, up from the 6.5-month supply of homes in November. Raw unsold inventory is 11.1% lower than it was a year ago. This brings inventory to its lowest level since March 2006, and is 28.2% below the record of 4.58 million in July 2008.

Lawrence Yun, NAR chief economist, said there were no surprises in the data. "It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit," he said.

"We’ll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit," Yun added. "By early summer the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010. However, the job market remains a concern and could dampen the housing recovery – job creation is key to a continued recovery in the second half of the year."

The NAR survey shows that of homes purchased in December, 43% of them were bought by first-timers, 42% were bought by repeat buyers, with the remaining sales to investors.

The national median home price was $178,300 in December, 1.5% higher than it was a year ago. Still, the median home price continues to be downwardly distorted due to the many distressed homes being sold. Distressed homes accounted for 32% of all sales last month.

For all of 2009, the median price was $173,500, down 12.4% from $198,100 in 2008; distressed homes accounted for 36% of total sales last year.

By housing type, single-family home sales fell 16.8% to an annual pace of 4.79 million in December from the November pace of 5.76 million, but remains 12.7% higher than the sales pace of 4.25 million homes from a year ago. Single-family home sales in all of 2009 increased 5% to 4,566,000.

The median sales price for single-family homes in December was $177,500, which is 1.4% higher than a year ago. For all of 2009, the median sales price of $173,200 was down 11.9% from 2008.

Condominium and co-op sales fell 15.4% to an annual pace of 660,000 in December from a pace of 780,000 in November, but were 34.7% above the 490,000 pace from in December 2008. Condo sales rose 4.8% for all of 2009 for a pace of 590,000 homes.

The median sales price for condos was $183,700 in December, 1% higher than it was a year ago. For all of last year, the median condo price was $176,100, which is 16.1 percent below 2008.

"The median price rose because of an increased number of mid- to upper-priced homes in the sales mix," Yun said. It was the first year-over-year gain in median price since August 2007.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said market conditions are challenging in some areas.

Golder recommends that buyers be prepared to move quickly on a home they're interest in. "There’s a shortage of lower priced homes for sale in much of the country, resulting in multiple bids in some areas," she said.

Regionally, in the Northeast, existing home sales dropped 19.5% to an annual pace of 910,000 in December but are 21.3% above a year ago. The median price in the Northeast was $241,700, up 3.2% from a year ago.

In the Midwest existing home sales fell 25.8% in December to an annual rate of 1.15 million but are 8.5% higher than December 2008. The median price in the Midwest was $143,200, which is 1.8% above December 2008.

Existing-home sales in the South fell 16.3% to an annual pace of 2.01 million in December but are 15.5% above December 2008. The median price in the South was $152,000, down 1% percent from a year ago.

In the West, the rate of existing home sales declined 4.8% to a pace of 1.38 million in December but are 15% higher than a year ago. The median price in the West was $236,000, up 2.7% from December 2008.

The average rate for a 30-year conventional fixed-rate mortgage rose to 4.93% in December, up from 4.88% in November. The average rate was 5.29% a year ago.

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