Existing home sales tank in January
* Existing home sales dropped 7.2% to a seasonally adjusted annual rate of 5.05 million in January. That was well below forecasts for a reading of 5.5 million.
* Regionally, sales were down across the board. They fell 5.2% in the West, 6.9% in the Midwest, 7.4% in the South, and 10.9% in the Northeast. By property type, single family sales dropped 6.9%, while condo and coop sales fell 8.1%.
* The raw number of homes for sale slipped 0.5% to 3.265 million from 3.283 million in December. Compared with a year earlier, supply has fallen 9.6%. The months supply at current sales pace indicator of inventory rose to 7.8 from 7.2; that's the highest since September. Median prices fell 3.4% to $164,700 in January from $170,500 in December. On a year-over-year basis, prices were unchanged.
New Year's revelers weren't the only ones with hangovers in January. Both the existing and new home sales markets clearly suffered from one related to the home buyer tax credit. The credit juiced sales in mid-2009 for new homes and late-2009 for existing homes. Yet in its wake, demand is clearly tapering off. The extension and expansion of the credit should help later in the spring selling season as the new deadline looms. But so far, it just isn't happening, with sales plunging almost 23% in the past two months.
Is there any good news in the latest batch of figures? Well, the supply of homes for sale continues to shrink. We've chipped away at the mountain of inventory to the tune of 1.3 million units over the past year and a half. That's a sign of progress. With median prices now running at their lowest level since May 2002, we're also taking care of the housing affordability problem that helped burst the bubble in the first place. That's cold comfort for upside-down homeowners. But it's exactly what we need to prompt some bottom-fishing by today's budget-conscious buyers.