Existing home sales in surprise jump
Sales of existing homes in December rose 6.5% from November. But prices continued to fall, down over 15% from last year.
NEW YORK (CNNMoney.com) -- The number of existing homes sold in December rose 6.5% from the previous month, according to a report released Monday, as bargain hunters took advantage of plummeting prices.
The National Association of Realtors said that home sales increased to a seasonally-adjusted, annualized rate of 4.74 million units. That's up from a revised pace of 4.45 million units sold in November and more than the rate of 4.4 million units projected by a consensus of industry analysts as reported by Briefing.com.
"We have some months to go before we are out of the woods on the housing front," said Robert Dye, senior economist at PNC financial services group. Especially considering "weak consumer confidence and ongoing rapid deterioration in labor markets."
Still, December's existing home sales are down 3.5% compared with December of 2007, when the seasonally-adjusted, annual sales rate was 4.91 million. Existing homes include single family homes, townhomes, condominiums and co-ops.
For all of 2008, there were 4,912,000 homes sold, which was the lowest volume since 1997, when there were 4,371,000 homes sold. Sales volume in 2008 was down 13.1% from the 5,652,000 existing homes sold in 2007.
Bargain hunters: Bargain prices are bringing buyers back into the market. The median existing home price was down 15.3% to $175,400 from December 2007, when the median price was $207,000. The median price measures where half of the homes sold for more and half sold for less.
"Americans love a bargain, and the housing market is no exception," said Mike Larson, real estate and interest rate analyst for Weiss Research in a written statement.
Thanks to the sales increase, the number of homes available on the market decreased 11.7% in December from the previous month, to 3.68 million. That represents a 9.3-month inventory supply at the current pace of sales, down from a 11.2-month supply in November.
"That's exactly what we need to see if the housing market is ever going to get back to a state of equilibrium," said Larson.
Home prices were pushed lower by the high volume of distressed sales, which accounted for 45% of December transactions according to the report.
"The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal, balanced conditions," said NAR chief economist Lawrence Yun in a written statement. He warned that the housing market is far from healthy. "Buyers will continue to have an edge over sellers for the foreseeable future."
Surge in the West: The number of homes sold nationwide was buoyed by a surge in the West, where the housing market has been hardest hit by a record number of foreclosures.
Existing home sales in the West surged 13.6% to an annual rate of 1.25 million in December, up 31.6% from a year ago. But the median price in the West was $213,100, down 31.5% from December 2007.
In the South, existing home sales increased 7.4% to an annual pace of 1.74 million in December, but that was still 11.2% lower than December a year ago. And sales in the Midwest increased 4% in December to an annual rate of 1.04 million, but were down 10.3% from the same period last year.
The Northeast saw sales edge 1.4% lower, to an annual pace of 720,000 in December, down 14.3% from December 2007.
In the months to come: Analysts said that the weakening job market would slow any recovery in housing.
On Monday morning, a slew of companies announced a massive wave of job cuts. Home Depot (HD, Fortune 500), the No. 1 home improvement retailer, announced it would eliminate 7,000 jobs, or 2% of its total workforce, while Caterpillar (CAT, Fortune 500) said it will cut 20,000 jobs.
"Unfortunately, we are seeing fast and furious [layoffs] now," said PNC's Robert Dye. "And that does add to the level of uncertainty and it does put workers and consumers on edge."
Mike Larson from Weiss Research echoed that sentiment. "It's hard to imagine a lasting turn in the housing market with thousands of layoffs being announced every few days," he said.
The Obama administration is now at work on an economic recovery plan, and Yun said that this will be critical to the revitalization of the housing industry.
"The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery," Yun said in a statement.