NEW YORK (CNNMoney.com) -- Existing home sales fell in December, the month after a federal tax credit was slated to expire, according to a real estate industry report issued Monday.
The National Association of Realtors reported that existing home sales plunged 16.7% last month to a seasonally adjusted annual rate of 5.45 million units, down from the revised rate of 6.54 million in November. Still, sales year-over-year were up 15%.
Analysts surveyed by Briefing.com had expected the December sales rate to hit 5.9 million annual units.
It was expected that sales would decline from November to December, because November was slated to be the last month in which sales to first-time homebuyers could qualify for a federal tax credit of up to $8,000. Lawmakers have since extended that deadline through April 30, adding a new credit of up to $6,500 for some existing home owners who move.
"This is a huge blow, much bigger than we expected," said PNC senior economist Craig Thomas. "Unfortunately, we'll continue to see this kind of volatility as economic supports like the tax credit are taken away."
Homebuyers rushing to get the credit made for a tough month-to-month comparison for December, Thomas said, and the month also suffers from seasonal issues like bad weather and holidays.
For all of 2009 there were 5,156,000 existing-home sales, which was 4.9% higher than 2008's total. That was the first annual sales gain since 2005.
In November, the planned tax credit expiration helped existing home sales gain 7.4% -- and that followed a 10% surge the previous month.
Despite December's disappointment, PNC's Thomas thinks the tax credit will help recharge the housing market the way Cash for Clunkers boosted auto sales in the longer term. That market saw an artificial jump, then dipped when the policy was dropped and then eventually got stronger.
"Since Cash for Clunkers has been over, autos have seen stronger and more sustainable sales -- and that's a function of a better economy," Thomas said. "That means home sales are likely to follow."
Price and inventory: The median price of homes sold in December was $178,300, a 1.5% gain over December 2008. That was the first year-over-year gain in the median price since August 2007. Distressed properties made up 32% of the houses sold during the month.
Total housing inventory fell 6.6% to 3.29 million existing homes for sale. That's a 7.2-month supply at the current selling pace, up from a 6.5-month supply in November.
Sales by property type: Housing markets suffered across the board. Single-family home sales fell 16.8% to a seasonally adjusted annual rate of 4.79 million in December from a pace of 5.76 million in November, but were 12.7% above the pace 12 months ago.
Condominium and co-op sales fell 15.4% to a seasonally adjusted annual rate of 660,000 units in December, from 780,000 in November, but were 34.7% above December 2008's rate.
Sales by region: Total existing home sales fell the most in the Midwest, dropping 25.8% in December to a pace of 1.15 million. Still, that's 8.5% above a year ago.
The West fared the best of all regions, but sales there still fell 4.8% to an annual level of 1.38 million; sales in the South sank 16.3% to 2.01 million; and the Northeast fell 19.5% to 910,000.
Outlook: PNC's Thomas said existing home sales will start to tick up in the coming months, though they will see another drop when the tax credit expires on April 30. The market will also be susceptible to changes in Federal Reserve policy, which affect mortgage rates, he said.
"There are a few headwinds, and volatility obscures the true condition of the market," Thomas said. "We all want transparency amid a confusing time, but there [will be] improvement in the months ahead."
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