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Home Sales Fell 5.3% in January

Sales of existing homes fell 5.3% in January, according to the National Association of Realtors, which speculated consumers might have been waiting to see the fine print in the stimulus package and how it might impact them.

Given so much stimulus package discussion in January, some would-be buyers simply sat out while waiting for clarity and certainty on the nature of housing stimulus, said Lawrence Yun, NAR chief economist.

At the same time, inventories fell to a two-year low.

Existing-home sales — including single-family, townhomes, condominiums and co-ops — fell 5.3% to a seasonally adjusted annual rate of 4.49 million units in January from a level of 4.74 million units in December. That was 8.6% lower the 4.91 million-unit pace in January 2008 — the point at which economists had just begun to debate whether the country was in a recession or headed for one.

“The housing market will soon get a lift from very favorable buying conditions — not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates,” said Yun.

NAR estimates the combination of the stimulus package and lower interest rates will boost home sales by about 900,000 this year compared to the pre-stimulus outlook. Inventory is expected to fall below an 8-month supply by the year end, which would be consistent with home price stabilization.

Total housing inventory at the end of January fell 2.7% to 3.60 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. Because sales were down, the January supply is up from a 9.4-month supply in December.

“The drop in total inventory is an encouraging sign because the number of homes on the market has declined steadily since peaking in July 2008, and inventory is at the lowest level in two years,” Yun said. In January 2007 there were 3.54 million homes for sale.

While the association took a positive view of the stimulus, it was more reserved about President Obama’s foreclosure relief plans, calling it “a step in the right direction.”

NAR resident Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said: “The plan should be wider in scope, with equal opportunity for all rather than targeting specific groups. Responsible homeowners who have been making payments consistently on time but do not have traditional refinance options should also qualify for potential loan modifications.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low at 5.05% in January from 5.29% in December; the rate was 5.76% in January 2008.

The large number of distressed home sales, and of those in lower price ranges, has pushed the median price to be markedly lower than under normal market conditions. The national median existing-home price for all housing types was $170,300 in January, down 14.8% from a year earlier when the median was $199,800. The median is where half of the homes sold for more and half sold for less.

McMillan said the market has fissured into two segments: distressed sales and traditional homes. A preliminary analysis by NAR suggests that non-distressed properties are holding their value much better.

“Distressed sales activity appears to be leveling off, although there are wide differences locally. For example, close to 80% of all sales are either foreclosed properties or short sales in Santa Ana, Calif., but less than 20% in the Chicago region,” Yun said.

About a quarter of all inventory is listed as being distressed, but NAR estimates that distressed sales — foreclosed or those requiring a lender-mediated short sale — comprised about 45% of all sales in January. “Home buyers are evidently competing for homes with deep discounts,” he said.

Because it often takes buyers months to find and close on a house, Yung predicted the impact of the stimulus on housing won’t be noticeable until this summer. He said the country may a lift from lower mortgage interest rates sooner.

In some segments of the country, the worst may already be over.

“A majority of markets experienced sales declines of more than 20% from a year ago, but some markets appeared to have reached the tipping point of accelerating home buying,” Yun said. “For example, home sales in Las Vegas have more than doubled, with some reports of multiple bids.”

Single-family home sales fell 4.7% to a seasonally adjusted annual rate of 4.05 million in January from a pace of 4.25 million in December, and are 7.1% less than a 4.36 million-unit level in January 2008. The median existing single-family home price was $169,900 in January, which is 13.8% below a year ago.

Existing condominium and co-op sales dropped 10.2% to a seasonally adjusted annual rate of 440,000 units in January from 490,000 units in December, and are 20.3% lower than the 552,000-unit level a year ago. The median existing condo price was $174,400 in January, down 20.6% from January 2008.

Regionally, existing-home sales dropped 14.7% in the Northeast dropped 14.7%, 5.7% in the Midwest and the South. Sales in the West were flat.

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