December existing home sales slump 2.2%
* Sales fell 2.2% to a seasonally adjusted annual rate of 4.89 million from 5 million in November. That was worse than economists' forecasts for a drop of 1% and it leaves combined sales (SFH+condo+co-op) at the lowest level on record. There's a longer history of data on single-family only home sales. Sales there were 4.31 million, the lowest since January 1998 (4.18 million).
Regionally, sales were down 4.6% in the Northeast, 1% in the South, 1.7% in the Midwest, and 2.1% in the West. The December sales rate was down 22% from 6.27 million in December 2006.
* For sale inventory came in at 3.905 million single-family homes, condos, and co-ops. That was down 7.4% from 4.217 million in November (previously reported as 4.273 million), but up 13.2% from 3.45 million in December 2006. On a months supply at current sales pace basis, inventory was 9.6 months, down from 10.1 months in November (previously reported as 10.3), but up from 6.6 months in December 2006.
* Median prices dipped slightly to $208,400 in December from $208,700 in November (previously reported as $210,200). On a year-over-year basis, prices were down 6% from $221,600 in December 2006. That's the biggest drop we've seen in this cycle so far.
There wasn't much holiday joy for the real estate market in December. Sales slumped to a fresh cycle low, while prices dropped by the largest margin yet. A combination of rising unemployment, declining consumer confidence, and tighter mortgage standards all conspired to keep potential buyers sidelined.
So what about the prospects for early 2008? Inventory for sale has declined a bit. But that's a normal seasonal development around the holidays. The key question is whether we'll see supply ramp up again as the spring selling season approaches. The chance of that happening is pretty high considering how many of 2007's disappointed sellers will need to give it the old college try again.
Mortgage rates have generally been falling for borrowers with good credit and down payment money in the bank. Freddie Mac's most recent survey showed 30-year loans going for 5.48%, the lowest since early 2004. The problem is that borrowers who need jumbo mortgages or who have credit problems are still facing a tighter lending environment. So the news is a mixed bag on the financing front.
Bottom line: I wouldn't look for great things from the spring selling season. Expect muted sales activity, especially if unemployment keeps rising. And over the course of 2008, we could see another mid-single-digit decline in home prices.