Sales of existing homes posted an unexpected increase last month as consumers snapped up bargain-basement foreclosures in California and Florida, closing out the worst year for the U.S. real estate market in more than a decade.
Analysts, however, cautioned that prices are likely to keep falling through this year, and they said the outlook for home sales is highly uncertain, despite a boost from low mortgage rates.
"I don't think we're close to a bottom yet," said Michelle Meyer, a Barclays Capital economist who sees nationwide prices falling another 15 percent this year. "We're still very far away from a normal housing market."
If President Barack Obama's administration enacts a plan to keep borrowers in their homes, analysts said, the number of foreclosures on the market might decline, but it is still unclear how successful any government efforts will be.
Sales of existing homes rose 6.5 percent to an annual rate of 4.74 million last month from a downwardly revised pace of 4.45 million in November, the National Association of Realtors said yesterday. Without adjusting for seasonal factors, sales nationwide were up 1.1 percent from a year earlier, reflecting a surge of more than 36 percent in the Western states.
Some in the real estate industry were encouraged by the surprising jump in sales and a big decrease in the number of homes for sale. "It looks like we are hitting bottom [in sales]," said Ronald Peltier, chief executive of HomeServices of America Inc., which owns real estate agencies in 19 states.
A separate report released this month showed that sales in Baltimore and its five surrounding counties slumped nearly 17 percent last month, compared with a year earlier, according to Rockville-based Metropolitan Regional Information Systems. The report also showed the average sales price fell 5.9 percent, to $294,954.
Only 1,482 homes changed hands for the month in the Baltimore region, compared with the 1,779 homes sold in December 2007, said Metropolitan Regional Information Systems. Prices fell in all jurisdictions, from just barely in Carroll, a 0.26 percent decline, to an almost 10 percent drop in value in Howard.
The nationwide median sales price plunged to $175,400 last month, down 15.3 percent from $207,000 a year ago, according to yesterday's Realtor report. That was the lowest price since May 2003 and the biggest year-over-year drop on record, going back to 1968. With sales of foreclosures and other distressed properties making up about 45 percent of sales, many economists expect prices to keep falling.
For all of last year, there were 4.9 million existing home sales, down more than 13 percent from a year earlier, and the lowest total since 1997.
Experts say that when the housing market turns around, price increases are likely to be modest.
"We have another year to go of soft home prices, primarily at this point because of the recession and job losses." Norm Miller, a real estate professor at the University of San Diego, said last week.
Meanwhile, Joyce Peterson, a real estate agent with Coldwell Banker outside St. Paul, Minn., said foreclosures have pulled down prices, but she said sellers are becoming more realistic and lowering their asking prices. "The list prices reflect the market more," she said.
In one encouraging sign, the number of unsold homes on the market last month fell nearly 12 percent to 3.7 million, the lowest level since January 2007. At the current sales pace, it would take 9.3 months to sell all the properties, down from 11.2 months in November.
If that number keeps falling, "it will set the stage for home prices to stabilize, which would be a huge relief to homeowners, bankers and certainly the government," wrote Bernard Baumohl, chief economist at the Economic Outlook Group in New Jersey.
However, Patrick Newport, an economist with IHS Global Insight, noted that the Realtors' group tends to underestimate the inventory of homes on the market because many foreclosures are sold through auctions, rather than real estate agents' listing services.
With the nation's economic outlook dimming, Lawrence Yun, the Realtors' chief economist, called on lawmakers to include tax credits for homebuyers in the economic recovery package being considered by Congress.
He said, "The economy just simply cannot recover as long as home prices continue to decline."