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Economy in Brief

U.S. Existing Home Sales Sink But Prices Firm
by Tom Moeller  December 25, 2009

The National Association of Realtors reported that sales of existing homes fell 16.7% from November as a since-extended tax credit for first home buyers was due to expire. The decline to 5.450M units (SAAR) followed a little-revised 7.4% rise and similarly strong gains back through July. The fall in December home sales greatly exceeded Consensus expectations for decline to 5.90M.

For all of last year, the tax credit, along with improved affordability, raised home sales by 5.5% from 2008. However, that recovery made up only a piece of larger declines during the prior three years. As a result, total sales last year remained 27.0% below the 2005 peak.

Total sales include sales of condos and co-ops. Sales of existing single-family homes alone fell 16.8% from November to 4.790M but remained up 18.3% from the January low. For all of 2009, sales rose 5.4% after sharp declines during the prior three years. (These data have a longer history than the total sales series). Sales of condos and co-ops fell 15.4% m/m but were up by one-third from the November '08 low.

Sales have been helped by a recently extended tax credit for first-time home buyers. The credit of up to $8,000 now runs though April 30. Additionally, a new credit of up to $6,500 is available to some existing home owners who move. The full details of the home-buyer tax credit can be found here

The median price of all existing homes jumped 4.9% last month to the highest level since July. The median price for a single-family home alone was strong, rising 4.8% to $177,500 (1.4% y/y). For the year as a whole, however, weakness in home sales pulled prices lower. The 11.6% decline from 2007 was the third consecutive year of decline. Prices remained down 22% from the 2007 monthly peak. Price weakness sharply raised home affordability; by 7.8% since July and by two-thirds from the 2006 low. The median family income for existing home buyers was $60,034 and mortgage payments amounted to 14.9% of that total. 

The number of unsold homes (single-family & co-ops) for sale fell a sharp 6.6% (-11.1% y/y) during December to the lowest level since March  2006. At the current sales rate there was a 7.2 months' supply of homes on the market, near the lowest since late 2006. The latest figure was down from a high of 11.3 months during April of 2008. For single-family homes, the inventory fell to a 6.9 months' supply, the lowest since March 2007. 

The data on existing home sales, prices and affordability can be found in Haver's USECON database. The regional price, affordability and inventory data is available in the REALTOR database.

Alt-A: The Forgotten Segment of the Mortgage Market from the Federal Reserve Bank of St. Louis is available here.

Existing Home Sales (Thous, SAAR) December November October Dec. Y/Y 2009 2008 2007
Total 5,450 6,540 6,090 15.0% 5,164 4,893 5,674
  Northeast 910 1,130 1,060 21.3 863 845 1,010
  Midwest 1,150 1,550 1,430 8.5 1,168 1,130 1,331
  South 2,010 2,400 2,280 15.5 1,913 1,860 2,243
  West 1,380 1,450 1,320 15.0 1,216 1,064 1,095
Single-Family 4,790 5,760 5,320 12.7 4,573 4,341 4,960
Median Price, Total, $ (NSA) 178,300 170,000 172,200 1.5 173,458 197,233 216,633

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