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Economy in Brief

U.S. Pending Home Sales Up in December But Down For 2008. Affordability At New High With Lower Rates & Prices
by Tom Moeller February 3, 2009

The National Association of Realtors indicated that pending sales of existing homes in December rose 6.3% The increase reversed most of the declines during the prior two months. Consensus expectations were for no change in sales m/m. For the year as a whole, sales fell 9.3% after declines of 14.6% and 9.8% during the prior two years. Despite the monthly sales increase, the December level was near the series' low.

The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.

Lower prices continued to bolster home sales. The median sales price of an existing home in December fell for the sixth straight month and was down 15.3% year-to-year. Prices were down 23.4% from their peak during June of last year. For single-family homes only, prices fell 2.9% during December and they were off 23.8% from their peak. Lower prices combined with lower interest rates significantly raised the affordability index of a home. It reached a record high for the series which extends back to 1970.

A 13.0% December rise in the South led the latest increase in total sales but were still off 16.2% for the year. Sales in the Midwest also posted a 12.8% gain in December but that was not enough to keep full-year sales from falling 9.7%. December sales in the West fell 3.7% in December but rose 7.8% for the full year. Home sales in the Northeast ticked lower by 1.7% for the month but repeated their decline of 2007 and fell 15.2%.

Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell by 11.7% last month, down 7.5% for the full year.

At the current sales rate there was a 9.3 months' supply of homes on the market and there was a 10.4 months' supply during all of last year, up from the 8.9 months supply during 2007 and 6.5 months during 2006. For single family homes, there was an 8.7 months' supply in December versus a full-year figure of 10.0 months.

The pending home sales data are available in Haver's PREALTOR database. The number of homes on the market and prices are in the REALTOR database.

The American Recovery and Reinvestment Act of 2009 from the Congressional Budget Office can be found here.

The Term Structure of Inflation Expectations from the Federal Reserve Bank of New York is available here.

Pending Home Sales (2001=100)  December November Y/Y 2008 2007 2006 
Total 87.7 82.5    2.1% 86.8 95.7 112.1 
  Northeast 62.1 63.2 -14.5 72.6 85.6 98.5
  Midwest 83.7 74.2 -1.2 80.9 89.6 102.0
  South 96.8 85.7 1.6 89.8 107.3 127.3
  West 97.5 101.2 17.5 99.3 92.1 109.5
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