Monday January 26, 04:41 PM
December home sales rise fails to erase dismal 2008
WASHINGTON (AFP) - Existing US home sales rose unexpectedly in December amid plunging prices but the gain failed to prevent the worst year in more than a decade, an industry group said Monday.
Sales increased 6.5 percent to a seasonally adjusted annual rate of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, the National Association of Realtors reported.
Analysts had expected December sales to fall to 4.4 million units.
For all of 2008, there were 4.91 million existing home sales or 13.1 percent below the 5.65 million transactions recorded in 2007.
"This is the lowest volume since 1997 when there were 4,371,000 sales," the group said in a statement, pointing out that home prices continued to "fall significantly."
"It appears some buyers are taking advantage of much lower home prices," association chief economist Lawrence Yun said.
"The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions," he said.
Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale. That amounted to a 9.3-month supply at the current sales pace, down from a 11.2-month supply in November.
A US housing mortgage meltdown has been at the center of a global financial crisis that has triggered a credit crunch amid a sharp economic slowdown.
The United States has been in a recession for more than a year, with companies announcing daily job cuts and unemployment rising rapidly.
The Commerce Department reported last week that housing construction starts and building permits also tumbled in December, raising alarms about the continued freefall in real estate, a pillar of the US economy.
While real estate agents say the housing market is finally showing some sign of life on the back of lower prices and mortgage rates, analysts urge caution.
"Of course, let's not get too carried away as the level of sales remains quite low," said Joel Naroff, of Naroff Economic Advisors.
"Housing is not out of the woods and it is not even clear we can see some end to the massive problems. But an increase in sales is good news no matter how you slice and dice it."
Naroff said the near 12 percent fall in housing inventory in December could be "the most important number" in the report.
"Sellers may have given up hope and have pulled their homes off the market, so the inventory could bounce back," he said.
Peter Kretzmer, senior economist with Bank of America (NYSE: IKJ - news) , said a bottom in housing construction remained "at least a half year away."
He expected a rapid decline of such activity this quarter and diminishing declines thereafter preceding a bottoming during the second half of 2009.
"We also expect home prices to fall into the early part of 2010," he said.
RDQ Economics said the market would be watching to see if existing home sales could stabilize around current levels as mortgage rates fell toward the end of 2008 and prices likely continuing to adjust lower.
"Recent pending home sales data, however, have remained weak," RDQ noted.
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