Sales of U.S. previously owned homes jumped more than forecast in December as buyers tried to lock in low mortgage rates before the economic recovery pushed borrowing up further.
Purchases of existing houses, which are tabulated when a contract closes, increased 12 percent to a 5.28 million annual rate, the most since May and exceeding the highest estimate of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. The median price dropped 1 percent from a year earlier, and the share of sales represented by foreclosures climbed.
Buyers are returning to the housing market after a government tax credit expired in the middle of 2010, indicating the drop in prices and cheap lending rates are making homes more affordable. At the same time, unemployment in excess of 9 percent and record foreclosures are among concerns that have prompted Federal Reserve policy makers to follow through with a second round of quantitative easing.
“Home sales are improving slowly, but surely,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “We really need to see job creation pick up to ensure housing continues to recover. Housing clearly is still a weak spot in the economy.”
For all of last year, purchases decreased to 4.91 million, the fewest since 1997.
Home resales jumped more than expected in December despite bad weather as sellers cut prices, offering some hope for a sector that has been struggling to recover from its worst slump in modern history.
MARK VITNER, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA: “It is a little surprising we saw such a big increase in existing home sales, but it is quite possible this reflects foreclosed properties and short sales. Banks likely wanted them off their books toward the end of year. There does not seem to be a whole lot of momentum in housing sector and we will not see much improvement until we move past this mountain of foreclosures. High level of sales look good on surface, but these properties are mostly being bought by investors and not true demand.”
PAUL LARSON, EQUITIES STRATEGIST, MORNINGSTAR, CHICAGO: “You have to take the home sales number with a grain of salt. We have a lot of foreclosures moving through the pipeline, and since those don’t play by rules of seasonality they can skew numbers. I don’t want to read too much into it.
From the Philly Inquirer:
Sales of previously owned homes across the nation rose in December for the fifth time in the last six months, offering a promise to some in the real estate industry of a long-awaited recovery in 2011.
Sales rose 12.3 percent from November, the National Association of Realtors reported Thursday, but were 2.9 percent below December 2009.
The median price nationally fell 1 percent, to $168,800, reflecting the continued effects of a record volume of distressed homes, which were 36 percent of the U.S. market in December, up from 32 percent a year earlier.
The end of 2009 was the expected expiration date of the federal tax credit for home buyers, which accounted for a large spike in sales. As it turned out, the tax credit was extended and expanded. After its April 30 expiration, sales of previously owned houses nationwide plunged to levels not seen for almost 40 years.