Prices Fall, But Home Sales Hit 12-Year Low
Thursday, February 26, 2009
Sales of existing homes fell to the lowest level in nearly 12 years last month even as plunging prices made houses less expensive.
The deteriorating economy is holding back would-be buyers as job losses add up and consumer confidence plummets, analysts said. Coupled with those concerns are more rigorous lending standards and bigger down payment requirements, as well as the fear that home values will continue their descent.
A housing market recovery will be unlikely until people feel more secure about their jobs, economists said.
"The key driver going forward is really the underlying economy," said Michael D. Larson, a housing analyst for Weiss Research. "You have gone from a bursting bubble to a broader, economically driven downturn in housing. And until we get some stabilization on the labor front, you are going to continue to see pressure on home sales."
Sales of existing homes fell by 5.3 percent to a seasonally adjusted annual rate of 4.49 million units in January, down from 4.74 million in the month before and 4.91 million in January 2008, according to the National Association of Realtors. It was the lowest sales level since July 1997.
The decline surprised many economists and analysts who were predicting home sales would begin to stabilize following a December bump up. Only six states recorded an increase in the number of sales in January, with the hardest hit states, including California and Florida, experiencing upswings.
"Those were the first states that declined and they might be leading the rest of the country back out," said Christopher Low, chief economist at FTN Financial. "So even though we have a new low, there is reason to think that the damage will end, or at some point that things will get better."
Sales of distressed properties -- homes that have been foreclosed upon or bought from a homeowner near foreclosure -- helped push prices down, the association said. The national median existing-home price for all property types was $170,300 in January, down 14.8 percent from $199,800 a year earlier. Distressed properties accounted for 45 percent of all sales in January.
In the South, the region that includes the Washington area, sales were off 5.7 percent from the previous month and 15.9 percent from a year earlier. The median sales price was $152,100, down 7.4 percent from January 2008.
The decline in home sales came even as new evidence emerged that taking on a mortgage payment is easier compared with the cost of renting. A recent report by the real estate consultancy Green Street Advisors in Newport Beach, Calif., found that the gap between the after-tax cost of a monthly mortgage payment versus renting has narrowed to below its historical average. That gap had spiked during the boom years.
The Realtors association said that part of the January slump may have had to do with people waiting to hear details of the Obama administration's housing rescue plans. The economic stimulus package includes an $8,000 tax credit for first-time home buyers, among other incentives. The administration also hopes to stem the tide of foreclosures by committing more than $75 billion to help as many as 9 million homeowners obtain more affordable mortgage terms.
The inventory of existing houses for sale fell to 3.6 million in January, from 3.7 million. That's a 9.6 month supply at the current sales pace, high compared with a healthy market.