USA Today
WASHINGTON (AP) — Sales of existing homes fell in December, closing out a year in which demand for homes slumped by the largest amount in 24 years.
The National Association of Realtors says sales of existing homes fell 0.8% last month to a 6.22 million annual rate, a bigger decline than had been expected.
For the year, sales dropped 8.4% to 6,480,000 homes, biggest annual decline since 1982, when existing home sales fell 17.7% in the midst of a severe recession. In 2005, 7,075,000 existing homes were sold.
The sales figure underscored the sharp contraction in the once high-flying housing market, which before last year had set sales records for five straight years.
Even with the sharp drop in sales last year, the median price of an existing home sold in 2006 managed to rise a slight 1.1% to $222,000. But that was far below the double-digit gains during the boom years. The median home price had risen 12.4% in 2005.
And the inventory of homes for sale was down 7.9% to 3.508 million units at the end of December.
Analysts had expected home resales to fall to a 6.25 million-unit pace from the 6.28 million-unit rate initially reported for November. November’s sales rate was revised down Thursday to 6.27 million.
After a five-year boom, housing slowed significantly last year, which has caused ripple effects throughout the economy with rising job layoffs in construction and other housing-related industries.
But some economists believe the low point for housing has been reached and they are forecasting a slow rebound in 2007. Because of that optimism, analysts don’t believe the slump in housing will drag the overall economy into a recession.
The 0.8% drop in sales in December came after two straight months of improving sales, first back-to-back sales gains since spring 2005.
David Lereah, chief economist for the Realtors, said even with the December setback, he believes sales of existing homes have hit bottom and will start to gradually improve.
He said that in 2005, 40% of the market represented purchases of second homes and investors buying homes looking to resell them for quick profits.
He said speculators have now left the market and that should leave sales at a more sustainable level.
“With fingers and toes crossed, it appears that we have hit bottom in the existing home market,” he said.
