Existing-Home Sales Dismal, But Expected To Pick Up

Existing-home sales plummeted 8.4% in 2006, their fastest pace in 17 years. The National Association of Realtors [NAR] announced yesterday that sales dropped 0.8% in December to an annual rate of 6.22 million, their first decline in three months. The number of homes on the market also declined, however, for the second month in a row -- to 3.508 million from 3.81 million -- suggesting that more buyers are being lured by low prices and affordable mortgage rates. Still, the inventory of unsold existing homes is 23.3% above the year-ago period. The median price of an existing home last month was $222,000, up from $217,000 in November. A total of 6.42 million previously owned homes are forecast to be sold this year, down from 6.48 million last year. Sales in 2006 were the third-highest on record according to the NAR, but there was also a 42% jump in foreclosures. The S&P Supercomposite Homebuilding Index dropped 3.6% after the report and is down 1.4% on the month. The Fed maintains that housing demand has likely stabilized and the economy should be able to expand moderately even as the housing slowdown continues.

• Sources: Wall Street Journal, Reuters, Bloomberg
• Related commentary: Existing Home Sales are Fantastic, According to the National Association of Realtors Anyway, Homebuilder Stocks: Is the Worst Over?, Housing Bubble and Real Estate Market Tracker
• Potentially impacted stocks and ETFs: Pulte Homes Inc. (PHM), Beazer Homes USA Inc. (BZH), Hovnanian Enterprises Inc. (HOV), Toll Brothers Inc. (TOL), M.D.C. Holdings Inc. (MDC), The Ryland Group Inc. (RYL), American Standard Companies Inc. (ASD), Centex Corp. (CTX), Lennar Corp. (LEN), KB Home (KBH). ETFs: iShares Dow Jones US Home Construction (ITB), SPDR Homebuilders (XHB), PowerShares Dynamic Building & Construction Portfolio (PKB)

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