Home Sales Down 8.4% Could Be At Bottom
Sales of existing homes slid 8.4% last year, the steepest fall in 17 years, but the market probably hit bottom in September and is entering a slow recovery that will last until June, the National Association of Realtors said Thursday.
One sign the market could revive this year is that the median home price, which had fallen for four months, was unchanged at $222,000 in December and was up 1.1% for all of 2006. And though it's still a buyer's market in most of the USA, the 7.3 month glut of homes for sale in November shrank to 6.8 months.
"It looks like we are on the bottom, and we will be scraping the bottom as we move along," said David Lereah, the NAR's chief economist. "The worst is over for existing home sales, but I'm still troubled about new homes."
The Commerce Department will release new home sales today. Those sales are expected to be down 17% for 2006 and to fall a further 9.7% this year, Lereah says.
Not everyone is ready to herald the end of the correction for existing homes. From November to December, they note, sales fell 0.8%, ending a two month upward trend. December sales were off 7.9% from December 2005. "It's very premature at this point to jump to the conclusion that we've turned the corner," says Brian Bethune of Global Insight.
Buyers are also facing rising interest rates, which make mortgages harder for some to afford. The average rate on a 30 years fixed rate loan crept up to 6.25% last week, the highest since early November, Freddie Mac said. Each quarter-point increase makes homes unaffordable for about 50,000 more people, Lereah said.
"Is the worst behind us? Most likely," says Joel Naroff, chief economist of Naroff Economic Advisors. "Are better times here? Doubtful."
During the last housing correction, in 1989, sales tumbled nearly 15%. This time, an overall healthy economy is cushioning the blow.
In areas that never overheated during the boom, such as parts of Texas and North Carolina, home sales are still setting modest records. The housing markets that were the hottest especially Florida and California are where the cooling off will take the longest.
In Florida, sales in December plummeted 28% from the year before, and prices dropped in five metro areas. In California, sales skidded 15%; prices were down in 13 metro areas of the state.
Sales last year in California, where the median priced home costs a gasp inducing $567,690, were the lowest in a decade. They are projected to fall a further 7% this year. Robert Kleinhenz, an economist for the California Association of Realtors, said, "I'm hopeful we'll see the bottom soon."
One sign the market could revive this year is that the median home price, which had fallen for four months, was unchanged at $222,000 in December and was up 1.1% for all of 2006. And though it's still a buyer's market in most of the USA, the 7.3 month glut of homes for sale in November shrank to 6.8 months.
"It looks like we are on the bottom, and we will be scraping the bottom as we move along," said David Lereah, the NAR's chief economist. "The worst is over for existing home sales, but I'm still troubled about new homes."
The Commerce Department will release new home sales today. Those sales are expected to be down 17% for 2006 and to fall a further 9.7% this year, Lereah says.
Not everyone is ready to herald the end of the correction for existing homes. From November to December, they note, sales fell 0.8%, ending a two month upward trend. December sales were off 7.9% from December 2005. "It's very premature at this point to jump to the conclusion that we've turned the corner," says Brian Bethune of Global Insight.
Buyers are also facing rising interest rates, which make mortgages harder for some to afford. The average rate on a 30 years fixed rate loan crept up to 6.25% last week, the highest since early November, Freddie Mac said. Each quarter-point increase makes homes unaffordable for about 50,000 more people, Lereah said.
Still, most economists say the bottom has probably been reached.
"Is the worst behind us? Most likely," says Joel Naroff, chief economist of Naroff Economic Advisors. "Are better times here? Doubtful."
During the last housing correction, in 1989, sales tumbled nearly 15%. This time, an overall healthy economy is cushioning the blow.
In areas that never overheated during the boom, such as parts of Texas and North Carolina, home sales are still setting modest records. The housing markets that were the hottest especially Florida and California are where the cooling off will take the longest.
In Florida, sales in December plummeted 28% from the year before, and prices dropped in five metro areas. In California, sales skidded 15%; prices were down in 13 metro areas of the state.
Sales last year in California, where the median priced home costs a gasp inducing $567,690, were the lowest in a decade. They are projected to fall a further 7% this year. Robert Kleinhenz, an economist for the California Association of Realtors, said, "I'm hopeful we'll see the bottom soon."
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