On the tape this morning:
Sales of existing U.S. homes plunged more than anticipated in December, showing the dependence of the housing market on a government tax credit.
Purchases slumped 17 percent the month after a government tax credit was originally due to expire, the biggest decline since records began in 1968, to a 5.45 million annual rate, the National Association of Realtors said today in Washington. The median sales price increased for the first time in two years.
First-time buyers rushed to complete deals before the $8,000 government incentive was due to end, pushing sales up 28 percent in the three months to November. The subsequent extension and expansion of the credit to include closings through June signal demand will strengthen in the first half of 2010, while raising the risk the market will then slow anew should jobs remain scarce.
For all of 2009, existing home sales rose 4.9 percent to 5.16 million, the first gain in four years, from 4.91 million in 2008. The median price last year was $173,500, down 12 percent from 2008, the biggest annual drop on record and probably the largest since the Great Depression, NAR chief economist Lawrence Yun said in a news conference.
The share of homes sold to first-time buyers fell to 43 percent in December from 51 percent the prior month, Yun said, indicating the expected end of the tax credit played a role in the drop in sales.
On January 19, I posted on homebuilders confidence, which was decidedly negative. Now we get additional (albeit somewhat lagging) insight into the housing market. Yes, YOY it looks good (+4.9%) and median prices look ok (+1.5%, but lets not forget as there was fewer first time buyers, there are more "moving on up" buyers, distorting median prices.
It is not better. I have repeatedly called the housing market weak as it is being held up by government programs and subsidies which cannot last forever (or much longer for that matter). If we are banking on housing and (government) employment for an economic rebound, be prepared for the fallout.
Disclosure: I own a home - current on payments