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Existing Home Sales Fall 5.3 Percent In January

Homebuyers still sit on the sidelines as prices drop

By Mark Huffman
ConsumerAffairs.com

February 25, 2009

"Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus," said Lawrence Yun, chief economist for the National Association of Realtors. "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."

NAR estimates the impact of the stimulus package and lower interest rates on the housing market to be about 900,000 additional home sales in 2009 compared to conditions before the stimulus package. Inventory is expected to fall below an 8-month supply by the year end, which would be consistent with home price stabilization.

There was one bright spot in the numbers. Total housing inventory at the end of January fell 2.7 percent to 3.60 million existing homes available for sale, which represents a 9.6-month supply2 at the current sales pace. Because sales were down, the January supply is up from a 9.4-month supply in December.

"The drop in total inventory is an encouraging sign because the number of homes on the market has declined steadily since peaking in July 2008, and inventory is at the lowest level in two years," Yun said. In January 2007 there were 3.54 million homes for sale.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low at 5.05 percent in January from 5.29 percent in December; the rate was 5.76 percent in January 2008.

A high prevalence of distressed home sales, and of those in lower price ranges, has skewed the median price to be markedly lower than under normal market conditions. The national median existing-home price3 for all housing types was $170,300 in January, down 14.8 percent from a year earlier when the median was $199,800; the median is where half of the homes sold for more and half sold for less.

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