January Existing-Home Sales Post a 5.3% Decline

The latest report released Wednesday by the National Association of Realtors [NAR] on sales of existing homes was discouraging and at the same time rather dismissive of any prior indication that home sales had relatively reached some form of stabilization. According to NAR, existing-home sales declined 5.3% last month to an annual rate of 4.490 mln units – even as declining prices made them more affordable, from a level of 4.74 mln units in December.

The national median home price for all housing types dropped to a six-year low of $170,300, down nearly 15% from a year ago when the median home price was $199,800. A high prevalence of distressed home sales (home foreclosures were up 18% in January-yr-over-yr, according to U.S. Foreclosure Market Report. A total of 274,399 properties received an auction notice or were seized by banks, the 10th consecutive month that foreclosures topped 250,000) have contributed to lower home price ranges, prompting the median price to be markedly lower than under normal market conditions.

Single-family home sales, noted NAR, fell 4.7% in January and are 7.1% less than a year ago. The median existing single-family home price was $169,900, 13.8% lower on a YoY basis.

The number of unsold condos dropped as well; plunging 10.2% in January with a median existing condo price reaching $174,400, down 20.6% from January 2008. Meanwhile, overall purchases declined in three of four U.S. regions, led by a 15% decline in the Northeast with a median home price of $228,200, down 14.7% from a year ago. Sales were unchanged in the West ; registering an annual rate of 1.20 million in January.

Median home prices have now declined for the seventh consecutive month, posting a 25.7% drop since their peak in June FY2005.

NAR chief economist, Lawrence Yun, sounds however optimistic when assessing the situation. He said the hesitation by some home buyers, which contributed to January’s sales decline, was understandable.

“Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus,” he said. “The housing market will soon get a lift from very favorable buying conditions – not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates.”

At the current sales pace there was a 9.6 month total housing inventory on the market which was near the lowest since 2007, after peaking in July 2008. Because sales were down, the January supply is up from a 9.4-month supply in December.

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