Alan Zibel, AP Real Estate Writer
USA Today
WASHINGTON — Sales of previously occupied homes took a large drop for the second straight month in January, falling to the lowest level since summer. It was another sign the housing market’s recovery is faltering.
The results, the weakest since June, were far worse than forecast and suggest the housing recovery will sputter without government support.
“Most of the improvement that we’ve seen in housing over the past year has been tied to some sort of stimulus program,” said Wells Fargo economist Mark Vitner. “Now that we’re seeing those programs wind down we’re seeing that housing is quite a bit weaker than many people had thought.”
The National Association of Realtors said Friday that home sales fell 7.2% to a seasonally adjusted annual rate of 5.05 million from a downwardly revised pace of 5.44 million in December. Economists expected a slight increase to a rate of 5.5 million.
Home sales have been sluggish this winter because the deadline for a tax credit for first-time buyers was extended. It had been set to expire on Nov. 30, causing sales to surge last fall. Then Congress extended the deadline until April 30 and expanded it to existing homeowners who move.
The housing report was another sign that consumers still aren’t feeling comfortable making sizable purchases, as jobs remain scarce. Weak consumer spending was a key reason why the economic growth is expected to be feeble this year. While the 5.9% pace in the final quarter of 2009 was stronger than expected, roughly two-thirds of that came from a burst of manufacturing.
“For Main Street, the after effects of the Great Recession linger on,” said Robert Dye, senior economist at PNC Financial Services.
Home sales are still up nearly 12% from the bottom, but are down 30% from their peak more than four years ago.
Last month, sales declined throughout the country, falling the most — nearly 11% — in the Northeast. Sales fell by about 7% in the South and Midwest and by more than 5% in the West.
The median sales price was $164,700, unchanged from a year earlier and down 3.4% from December.
The inventory of unsold homes on the market was down slightly at 3.27 million. That’s a 7.8 month supply at the current sales pace, up from a recent low of 6.5 months in November.
The bleak report comes after the government reported Wednesday that sales of newly built homes plunged 11% to a record low in January. The report, which measures signed contracts to buy homes rather than completed sales, also came as surprise to economists.
Another question hanging over the housing market this year is whether interest rates will rise, and by how much. The Federal Reserve‘s $1.25 trillion program to push down mortgage rates is scheduled to expire on March 31.
After that program runs out, mortgage rates should not spike, but rather rise gradually to about 6% over the next year, predicts Cameron Findlay, chief economist at LendingTree.com. That will mean homebuyers may have to reduce their price range, and could put downward pressure on prices.
Copyright 2010 The Associated Press. All rights reserved