Home Sales Contracts Edge Back Up

By:: Peter King | February 02, 2010

Pending home sales edged back up in December, one month after taking a steep plunge that raised doubts about whether a recovery in the housing market can be sustained.

Signed contracts for sales of existing homes increased a seasonally adjusted 1 percent in December, according to figures released today by the National Association of Realtors (NAR). That follows a 17 percent drop in November, which ended a streak of nine consecutive monthly increases.

Overall, December sales were up 11 percent over their December 2008 figure.

Despite the November decline, December’s tally was still the fifth-highest total in two years, according to Lawrence Yun, NAR chief economist. Yun said that the scheduled expiration, then renewal and expansion, of a homebuyer’s tax credit in November skewed the result and led to big swings in the numbers.

Increase predicted for 2010

Yun predicted that about 2.4 million buyers will take advantage of the home buyer tax credits this year before they expire on April 30. He predicted that existing home sales would reach 5.6 million in 2010, up from 5.16 million in 2009.

He said rising sales should help halt the slide in home prices, which have been undercut by large volumes of foreclosed properties coming on to the market.

“For several months now we’ve been seeing stabilization in all of the home price measures as inventory is pulled down,” Yun said. “As a result, the housing wealth for many middle class families has begun to stabilize.”

The December results were generally in line with the expectations of economists, who had called for sales contracts to remain unchanged or post a slight increase.

New home construction down

Meanwhile, spending on new home construction declined in December, as builders held off on new projects in the face of a glut of foreclosures on the market. Total private residential construction fell 2.8 percent in December, according to monthly figures released by the Commerce Department, to an annual rate of $260.4 billion.

The figure marked the second consecutive monthly drop and an 11 percent decline from December 2008. The Commerce Department reported that total residential construction in 2009 was $252.2 billion, a 28 percent decline from the $350.1 billion reported in 2008.

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