Sales of Existing Homes Plunge in December
Posted on January 25, 2010
Sales of existing homes slowed in December, much more than anticipated. The expiration of the government tax credit for first time homebuyers is thought to be a major cause of the drop. Purchases of existing homes were down 17% in the biggest drop since 1968, when records were first kept. Bloomberg reports:
First-time buyers rushed to complete deals before the $8,000 government incentive was due to end, pushing sales up 28 percent in the three months to November. The subsequent extension and expansion of the credit to include closings through June signal demand will strengthen in the first half of 2010, while raising the risk the market will then slow anew should jobs remain scarce.When all sales figures from 2009 are counted, sales of existing homes rose 4.9 percent to 5.16 million. The median price dropped 12% from the year before, down to $173,500.
"We'll see a pickup in existing home sales in the next couple of months,” said Adam York, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who forecast a 5.4 million sales pace. Although "we're past the bottom," he said, "I don't think there's going to be a lot of buyers out there looking for a home outside of the tax-induced effects until they feel more comfortable with the labor market."