Sales of existing homes posted an unexpected increase last month, as sales of bargain-basement foreclosures in California and Florida boomed, closing out the worst year for the U.S. real estate market in more than a decade.
Analysts, however, cautioned that prices are likely to keep falling through 2009, and said the outlook for home sales is highly uncertain, despite a boost from low mortgage rates.
“I don’t think we’re close to a bottom yet,” said Michelle Meyer, a Barclays Capital economist who sees nationwide prices falling another 15 percent this year. “We’re still very far away from a normal housing market.”
If President Barack Obama’s administration enacts a plan to keep borrowers in their homes, Meyer said, that might stop some foreclosures from flooding the market, but it’s still unclear how successful any government efforts will be.
Sales of existing homes rose 6.5 percent to an annual rate of 4.74 million in December, from a downwardly revised pace of 4.45 million in November, the National Association of Realtors said Monday. Without adjusting for seasonal factors, sales nationwide were up 1.1 percent from a year earlier, reflecting a surge of more than 36 percent in the Western states.
The nationwide median sales price plunged to $175,400, down 15.3 percent from $207,000 a year ago. That was the lowest price since May 2003 and the biggest year-over-year drop on records going back to 1968. With sales of foreclosures and other distressed properties making up about 45 percent of sales, many economists expect prices to keep falling.
For all of 2008, there were 4.9 million existing home sales, down more than 13 percent from a year earlier, and the lowest total since 1997.
Making matters worse, layoffs continue to accelerate as the recession deepens.
Home Depot Inc. said Monday it plans to eliminate 7,000 jobs while closing four dozen of its smaller home improvement stores. Sprint Nextel Corp. said it is eliminating about 8,000 positions as it seeks to cut costs.
Experts say that when the housing market turns around, price increases are likely to be modest.
“We have another year to go of soft home prices, primarily at this point because of the recession and job losses.” Norm Miller, a real estate professor at the University of San Diego, said in an interview last week.
One encouraging sign — the number of unsold homes on the market in last month fell nearly 12 percent to 3.7 million, the lowest level since January 2007. At the current sales pace, it would take 9.3 months to sell all the properties, down from 11.2 months in November.
However, Patrick Newport, an economist with IHS Global Insight, noted that the Realtors’ group tends to underestimate the inventory of homes on the market because many foreclosures are sold through auctions.
Lawrence Yun, the trade group’s chief economist, called on lawmakers to include tax credits for home buyers in the economic recovery package being considered by Congress.
He said, “The economy just simply cannot recover as long as home prices continue to decline.”