Home Sales Post Second Big Drop

By:: Kirk Haverkamp | February 26, 2010

Existing home sales took another big drop in January, falling 7.2 percent after posting a record decline in December.

It was the second largest monthly decline on record, according to the National Association of Realtors, coming on the heels of December’s record 16.2 percent decline. The two monthly declines followed a streak of eight consecutive monthly gains dating back to April 2009, raising concerns about the direction the market is headed.

NAR officials attributed the declines in part to the previously scheduled end of the first-time homeowner tax credit at the end of November. While the credit was extended through April and a new credit added for repeat homebuyers, they said the effect of those moves have yet to be felt in the market.

“Most of the completed deals in January were based on contracts in November and December,” said Lawrence Yun, chief economist for NAR. “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.”

Even so, Yun said the current monthly data was “not encouraging” and raised concerns about the strength of the economic recovery. Economists had predicted a slight increase in the January sales rate.

The January seasonally adjusted annual sales rate was 5.05 million units, representing a 22 percent decline from November’s recent peak of 6.49 million. Even so, January’s figures represented an 11.5 percent annual gain over the 4.55 million level posted in January 2009.

The median sales price fell to $164,700 in January, down from $170,500 in December, but identical to the January 2009 figure. Distressed homes made up 38 percent of all sales, which continued to bring prices down.

The percentage of first-time homebuyers declined, while investors made up a bigger percentage of sales in January. First-time homebuyers accounted for 40 percent of all homes in January, down from 43 percent in December, while investors made up 17 percent of all sales, up from 15 percent the month before. Repeat buyers accounted for the remaining purchases.

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