Financial markets have started to ponder fears of a double-dip recession in the wake of worrisome figures on jobless claims and potentially waning consumer demand this week, but the housing market has unleashed more negatives than any other sector.
Today, the National Association of Realtors reported that existing-home sales – including single-family homes, townhomes, condominiums and co-ops – dropped 7.2 percent to a seasonally-adjusted annual rate of 5.05 million units in January. That drop is versus the revised 5.44 million in December, but remains 11.5 percent above the 4.53 million-unit level in January 2009.
That may be far from a double-dip scenario; however, the plunge comes after economists expected an increase in the key indicator for the housing sector.
And sales fell despite the extension in November of first-time homebuyer tax credits of up to $8,000, along with an expansion of the program to long-time residents who can claim a credit of up to $6,500 if they qualify. The new deadline for both credits is April 30, 2010.
Lawrence Yun, NAR chief economist, said the decrease is worrisome, despite a potential bounce-back in coming months based on delays in responding to the tax credit extension.
“Most of the completed deals in January were based on contracts in November and December. People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales,” he said. “Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”
Total housing inventory by the end of January fell a modest 0.5 percent to 3.27 million existing homes available for sale – that represents a 7.8-month supply at the current sales pace. That is up from a 7.2-month supply in December.
“Activity should be picking up strongly in late spring as buyers take advantage of the tax credit, which is critical to absorb distressed properties reaching the market and to continually chip away at inventory,” Yun said.
A separate NAR survey shows first-time buyers purchased 40 percent of homes in January, down from 43 percent in December.
Some of the other troubling news out of the housing sector this week:
- A key housing finance index showed that mortgage applications last week fell 8.5 percent on a seasonally-adjusted basis from the previous week, and that demand for home purchase loans is at the lowest level in 13 years.
- The 30-year-fixed mortgage rate jumped back over the key level of 5 percent – to 5.05 percent for the week ending yesterday, up from 4.93 the previous week.
- The Commerce Department said sales of newly built single-family homes dropped 11.2 percent in January to a 309,000-unit annual rate, the lowest rate registered since records started in 1963.