Home Resales Rise as Prices Tumble

Existing-home sales rose in December as buyers took advantage of discounted prices in distressed housing markets.
By: JEFF BATER: WSJ.com
Home resales rose to a 4.74 million annual rate, a 6.5% increase from November's revised 4.45 million annual pace, the National Association of Realtors said Monday. November originally was seen down by 8.6% to 4.49 million.

NAR economist Lawrence Yun said sales in distressed markets were very high amid foreclosures; of all sales in December, about 45% were distress sales at discounted prices.

The median home price was $175,400 in December, down 15.3% from $207,000 in December 2007. The median price in November this year was $180,300. The 15.3% drop was the largest on record, the NAR said.

"It appears some buyers are taking advantage of much lower home prices," Mr. Yun said, adding the market is far from balanced as buyers hold an edge over sellers.

The December resales level of 4.74 million reported Monday by NAR was above Wall Street expectations of a 4.40 million sales rate for previously owned homes.

For all of 2008, sales totaled 4.91 million, down 13.1% from 5.65 million in 2007.

The average 30-year mortgage rate was 5.29% in December, down from 6.09% in November, according to Freddie Mac.

While a drop in mortgage rates is an incentive for demand, the housing industry is floundering as big challenges lurk. The labor market, for one thing, is shrinking - 2.6 million jobs were lost last year. People are afraid to make major purchases, like homes. Also, home prices are falling, discouraging buying by those waiting for a better deal. And mortgage financing is harder to secure than during housing's boom years.

U.S. sales of new homes dropped in November by 2.9% to 407,000, the latest government data showed. Year over year, sales were down 35%. High inventories of unsold homes virtually guarantee lower prices and sales down the road. Data on December will be released this week.

Monday's data on the existing-home market showed inventories fell 11.7% at the end of December to 3.68 million available for sale, which represented a 9.3-month supply at the current sales pace. There was a 11.2-month supply at the end of November.

Regionally, sales rose 4.0% in the Midwest, 7.4% in the South, and 13.6% in the West. Sales fell 1.4% in the Northeast.

Leading Indicators Edge Up
Separately, the composite index of leading indicators rose 0.3% in December, to 99.5, according to preliminary estimates released Monday by The Conference Board.

The December figure reversed a 0.4% decline in November and a 1.0% decline in October. Over the six months ended December, the index has fallen 2.5%.

In December, four out of the 10 indicators rose. The largest positive contributors to the index were real money supply, the interest rate spread, manufacturers new orders for consumer goods and materials and manufacturers' new orders for nondefense capital goods. The most significant negative contributors were building permits and average weekly manufacturing prices.

The index was equal to 100 in 1996.

"As we move into the new year, the big question is whether conditions will worsen further," said Ken Goldstein, labor economist at The Conference Board. "The Conference Board's Indicators suggest we'll still be in an intense recession through the spring. Expect declines in output and employment over the next several quarters, with unemployment possibly rising to 9%."

The Board reported that the coincident index fell in December, by 0.5% to 104.1. It was driven by contraction in industrial production and employees on nonagricultural payrolls. Over the six months ended in December, the index decreased 2.2%.

The lagging index fell 0.4% in December to 113.3. Based on revised data, the index remained unchanged in November and increased 0.1% in October.

The leading and coincident economic indicators have been falling for more than a year now, and the breadth of their deterioration has been notably widespread.

The Conference Board is a non-profit research and business membership group that computes the composite indexes from the U.S. Department of Commerce.

—Matthew Cowley contributed to this article.