WASHINGTON - Existing home sales sank 16.7% in December to a 5.45 million annual rate, the largest monthly decline on record, as the year-over-year median price increased for the first time in more than two years, the National Association of Realtors reported today.
Sales declined as buyers stopped rushing to close on home sales once Congress extended the homebuyers tax credit through June, said Lawrence Yun, the NAR’s chief economist. He said the drop was not a drastic as it could have been and that the data suggests “sustainable momentum” for sales.
Economists polled by Thomson Reuters expected existing homes to sell at a 5.90 million annual rate in December, according to the median estimate.
Sales rose 7.4% in November to an annual rate of 6.54 million sales, unrevised from what was initially reported.
The months’ supply of existing homes increased to 7.2 months from 6.5 months in November.
The median home price increased 1.5% year-over-year, the first increase since August 2007 and the largest increase since May 2006. The increase is partly due to the tax credit expansion for “move up buyers,” those who have already owned a home. These buyers tend to buyer higher priced homes, Yun said.
Congress extended and expanded the homebuyers’ tax credit in November. The program was extended until June 30, 2010, and expanded to include some “move up buyers.” Before the credit was extended in November, buyers had rushed into the market to take advantage of before the credit expired at the end of the month.
For all of 2009, existing home sales increased 4.9% from 2008 as the median home price fell by 12.5%.
Despite the weak December data, existing home sales this year are “projected to result in substantial gains against the depressed activity that held through most of 2009,” John Lonski, chief economist at Moody’s Capital Markets Group, said in a research note today released before the report.
Yun said that existing sales “depend critically” on job growth in the second half of 2010 after the tax credit expires.
Yun said that once the Federal Reserve stops buying mortgage-backed securities after March, mortgage rates could rise 70 basis points.
Last week, the National Association of Home Builders' housing market index, a monthly gauge of home builders’ sentiment, fell to its lowest point since June. New home sales figures for December will be released by the Commerce Department on Wednesday.
