Existing home sales drop 5.3% in January to record low
* Existing home sales fell 5.3% to a seasonally adjusted annual rate of 4.49 million from 4.74 million in December. That was much worse than the forecast for a reading of 4.79 million and the lowest level on record. Single-family sales dropped 4.7%, while condo and cooperative sales tanked 10.2%. Speaking of SFH sales, they were the lowest since August 1997 (a tie at 4.05 million).
* The raw number of homes for sale dipped 2.7% to 3.6 million units from 3.7 million in December and 4.16 million a year earlier. The months supply at current sales pace indicator of inventory climbed to 9.6 from 9.4 a month prior and 10.2 in January 2008.
* The median price of an existing home fell 3.1% to $170,300 from $175,700 in December. That was also off 14.8% from $199,700 in the year ago period. That leaves existing home prices at the lowest level since March 2003 ($169,400) -- almost six years ago.
Another false dawn? That's what December looks like, considering the dismal performance of the existing home market last month. Sales fell at a much faster rate than forecast, with combined sales of single-family homes now plumbing depths unseen since 1997. Prices tanked almost 15% from last January, leaving the median price of an existing home at a level unseen since March 2003 -- almost six years ago.
The list of challenges for housing is long, and familiar, at this point. Tighter mortgage lending standards and falling confidence are clearly on it. Yet the biggest challenge of all is job security. You can take steps to manipulate interest rates, which the Federal Reserve is doing. You can tout rising home affordability. You can try to minimize foreclosures to stem the flood of supply hitting the market. But if Americans are worried they won't have a job next month, next quarter, or next year, you've got a real problem. It doesn't matter if mortgage rates are 3% or 8%. People just aren't going to buy many houses.
The one potentially encouraging trend? The raw supply of homes for sale dropped from year-ago levels for yet another month. We'll have to see if that trend continues. Inventory is already down sharply in the new home market, and if the existing home market can follow suit, it will eventually help stabilize pricing. Unfortunately, we're still oversupplied to the tune of more than a million homes -- proof positive the healing process will take time.