Existing home sales surge in January, but prices keep falling

Tuesday, February 27th, 2007

USA Today

WASHINGTON (AP) — Sales of existing homes rose in January by the largest amount in two years, raising hopes that the worst of the severe slump in housing may be coming to an end. Median home prices, however, fell for a sixth straight month.

The National Association of Realtors reported Tuesday that sales of previously owned homes rose 3% last month from December to a 6.46 million-unit annual rate. It was the biggest one-month increase since a 3.3% increase in January 2005, a time when housing was roaring toward the peak of its five-year boom.

The median price of an existing home sold in January dropped to $210,600, a decline of 3.1% from a year ago. It marked the sixth straight month that the median price has been down compared with a year ago. The January decline was the third-biggest drop in history.

Analysts said that the decline in home prices was actually an encouraging sign that home sellers are starting to adjust their asking-price down and this should help speed the correction in housing.

“For the last several months I have been hemming and hawing on whether we have reached bottom,” said David Lereah, chief economist for the Realtors. He said that the January report was an encouraging sign that the bottom for sales activity was reached last September with sales expected to stabilize this year.

Lereah stopped short of saying the housing contraction had reached its bottom last year, but he noted that inventory levels are near a balance.

“It appears the country as a whole is getting close to balance,” he said. “We will slowly and sluggishly get our way out of this contraction.”

But he cautioned that the warm weather in December boosted home closing in January, the activity that is tracked in the Realtors report. He said there could be a bit of a payback in coming months.

The inventory of homes for sale rose 2.9% to 3.549 million units, representing 6.6 months’ supply at the current sales pace.

By region of the country, sales rose the most in the West, 5.6%, followed by gains of 4.8% in the Midwest and 2% in the South. Sales in the Northeast were unchanged.

Comments are closed.