Existing-home sales and prices dropped in December, the National Association of Realtors reported today, adding fuel to the trade group’s argument that President Bush and Congress need to increase the conforming loan limits on mortgages backed by Fannie Mae and Freddie Mac to jumpstart home buying and help the economy avoid recession.
December sales of existing homes — including single-family, townhomes, condominiums and co-ops — slipped 2.2 percent to a seasonally adjusted annual rate of 4.89 million units from a pace of 5 million in November, and were 22 percent below the 6.27 million-unit level in December 2006.
For all of 2007 there were 5.65 million existing-home sales, the fifth-highest year on record; however, the total was 12.8 percent below the 6.47 million transactions recorded in 2006.
Lawrence Yun, NAR’s chief economist, said the market is experiencing uncharacteristic weakness. “Home sales remain weak despite improved affordability conditions in many parts of the country, but we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate,” he said. “Home prices are lower, mortgage interest rates continue to decline, and incomes are higher, but many potential buyers are delaying a purchase.”
Single-family home sales declined 2 percent to a seasonally adjusted annual rate of 4.31 million in December from 4.4 million in November, and were 21.6 percent below the 5.5 million-unit level in December 2006. In all of 2007, single-family sales fell 13 percent to 4.94 million.
The median existing single-family home price was $206,500 in December, down 6.5 percent from a year earlier. For all of 2007, the single-family median was $217,800, down 1.8 percent from 2006.
Existing condominium and co-op sales fell 3.3 percent to a seasonally adjusted annual rate of 580,000 units in December from 600,000 in November, and were 24.5 percent below the 768,000-unit pace a year ago. Condo sales for all of 2007 fell 11 percent to 713,000 units.
The median existing condo price was $222,200 last month, which is 2.5 percent below December 2006. In all of 2007, the median condo price was $226,400, up 2 percent from 2006.
Regionally, existing-home sales in the South slipped 1 percent to an annual pace of 1.97 million in December, and were 20.9 percent below December 2006. The median price in the South was $173,400, down 4.1 percent from a year ago.
Existing-home sales in the Midwest declined 1.7 percent in December to a level of 1.16 million and were 20.5 percent below a year ago. The median price in the Midwest was $159,800, which is 3.9 percent lower than December 2006.
In the West, existing-home sales fell 2.1 percent to an annual rate of 940,000 in December, and were 24.8 percent below December 2006. The median price in the West was $309,800, down 11.1 percent from a year ago.
Existing-home sales in the Northeast dropped 4.6 percent to an annual rate of 830,000 in December, and were 22.4 percent below a year ago. The median price in the Northeast was $258,600, down 8.9 percent from in December 2006.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.1 percent in December from 6.21 percent in November; the rate was 6.14 percent in December 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 5.69 percent. “Although interest rates on jumbo loans have fallen somewhat, they remain well above conventional mortgage rates,” Yun said. “It isn’t surprising that the share of single-family homes selling for more than $500,000 fell to 12.4 percent of transactions in December from 14.2 percent a year ago.”
Total housing inventory fell 7.4 percent at the end of December to 3.91 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in November. “The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,” Yun said.
The national median existing-home price for all housing types was $208,400 in December, down 6 percent from a year earlier when the median was $221,600. Because home sales have slowed the most in higher-cost markets, there is a downward distortion to the national median as the mix of closed sales has changed over the past year. For all of 2007, the median price was $218,900, down 1.4 percent from a median of $221,900 in 2006.
NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said that raising the loan limit on conventional financing is urgently needed. “The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas,” he said.
NAR projects the higher loan limit would increase annual home sales by nearly 350,000, reduce foreclosures by 140,000 to 210,000, and increase economic activity by $44 billion. “What’s more, this would come at no cost to taxpayers – it’s a policy change that could really boost the economy,” Gaylord said.
Other projections of NAR’s analysis show raising the loan limit would reduce the supply of homes on the market by one to one-and-a-half months, and strengthen home prices by two to three percentage points. In addition, as many as 500,000 jumbo loans would be refinanced to lower interest rates, the group claims.
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