Home sales made an unexpected tumble in January, falling to a
nearly 12-year low as rising layoffs scared Americans from big
purchases.
Sales of previously owned homes fell 5.3% to an annual rate of
4.49 million, the National Association of Realtors said
Wednesday.
The big drop exceeded the far more modest, 0.4% dip Wall Street
expected, carrying sales to the lowest since July 1997.
"The list of challenges for housing is long," Weiss Research
analyst Mike Larson said. "The biggest challenge of all is job
security."
A separate, Labor Department report said mass layoffs last month
were more than 50% higher than the year-earlier level. Mass layoff
events totaled 2,227, down by 48 from 2,275 in December yet up
sharply from 1,476 in January 2008. Mass layoff events involve 50
or more people at a single employer losing their jobs.
Contributing to the 5.3% sales decrease might have been the
massive relief plan President Barack Obama quickly pushed through
Congress to spur the economy out of its deep recession. The NAR
indicated negotiations in Washington over the package restrained
buyers. Obama signed it Feb. 17, doling out, among other things, an
$8,000 tax credit for first-time home buyers.
"Given so much stimulus package discussion in January, some
would-be buyers simply sat out for clarity and certainty on the
nature of the housing stimulus," NAR economist Lawrence Yun
said.
Sharply falling prices curbed sales, too. The median home price
dropped 14.8% in January to $170,300 from the year-earlier level.
The year-over-year drop in December was 15.2%.
"A sustained recovery in the housing market is unlikely until
home prices stabilize," Insight Economics analyst Steven Wood
said.
A bloated supply of unsold homes has forced down prices, as has
a surge in foreclosures. About 45% of all existing-home sales in
January involved foreclosures and other distressed property
transactions.
The lower prices on all the foreclosed property have squeezed
new homes out of the market. The latest data show demand for new
homes fell 45% in December 2008 from a year earlier. Reduced demand
for new homes, with the resulting bloat in inventory, is forcing
builders to slash groundbreakings; in January, housing starts were
56.2% below the level of construction in January 2008, government
data last week said.
Sales on foreclosed property have helped cut inventories of
existing homes, which slipped 2.7% to 3.6 million available for
sale at the end of January.
Still, a key housing sector gauge, the month's supply at the
current sales pace, rose because sales had fallen, going up to 9.6
months from 9.4 months. "Unfortunately, it's still so high, at just
under 10 months, that it guarantees further price falls," said Ian
Shepherdson, an analyst at High Frequency Economics.
Sales of previously owned homes, year over year, fell 8.6% from
the pace in January 2008, Wednesday's report said. Because of the
credit crunch, people have had a harder time securing loans.
Falling prices are also softening demand, as people decide to wait
for a better deal. The stock market's collapse has eroded wealth.
And mass layoffs are scaring people away from the housing
market.
Since the recession began in December 2007, the economy has shed
3.6 million jobs, including 598,000 jobs in January. Job losses and
foreclosures have sent people moving in with families, causing a
slowdown in the household formation rate.
"No doubt, the worsening economic condition is contributing to
lower sales," Yun said.
The average 30-year mortgage rate slipped to 5.05% in January
from 5.29% in December, according to Freddie Mac (FRE). While the
slumping economy makes money cheaper, it is a weight on the minds
of would-be buyers.
"If Americans are worried they won't have a job next month, next
quarter or next year, you've got a real problem," Weiss's Larson
said. "It doesn't matter if mortgage rates are 3% or 8%. People
just aren't going to buy many houses."
The NAR is looking ahead. Lower interest rates and the economic
stimulus will bring about 900,000 additional home sales in 2009,
the trade group estimates.
"The housing market will soon get a lift from very favorable
buying conditions, not only from improved affordability, but also
from the stimulus of an $8,000 first-time home buyer tax credit and
higher conforming loan limits that will allow more people to tap
into 50-year low mortgage rates," Yun said.
-By Jeff Bater, Dow Jones Newswires; 202-862-9249; jeff.bater@dowjones.com