Monday, January 25th, 2010
Bad News Continues for the Housing Sector
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Existing home sales fell a greater-than-expected 16.7% in December, signaling more trouble for the battered housing sector.
Existing home sales in December fell more-than-expected after three straight increases due to the government’s housing tax credit. Home sales declined by 16.7% to a 5.45 million annual rate from an unrevised 6.54 million in November, according to the National Association of Realtors.
Economists believe that the housing sector and larger real estate market will remain weak without much structural improvement. However, they insist that the pace of the overall collapse has moderated as excess inventory works its way through the system.
The expiration of the housing tax credit, which boosted sales by some 28% from August through November, will also produce more normalized figures in coming periods. The tax credit has been extended through June, but analysts do not project any growth until February or March.
Real growth in demand will begin when the employment numbers turn around, according to some analysts. Currently, only 46.1% of people between the ages of 16 and 24 are employed, which is less than any time since the government began collecting data in 1948.
Meanwhile, countless others are pushing back major events, like buying a house, due to high unemployment and continued tightness in the credit markets. As a result, investors may have to wait for a turn in unemployment and a jump in consumer confidence to signal a turnaround.
The Takeaway…
- Existing home sales fell 16.7% to a 5.45 million annual rate, which was lower than the market was expecting, and due primarily to the expiration of the government’s tax credit.
- A robust recovery in demand will likely not occur until employment improves and consumer confidence is restored in the economy.
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-- Written by David Breen
