Washington, DC (PressExposure) February 26, 2009 -- Even though falling prices made existing homes more affordable, home purchases fell by 5.3% in January to an annual rate of 4.49 million which was the lowest number since 1997 and the decline came in spite of the fact that the average rate on a 30-year fixed mortgage fell to a record low 4.96 % in the week ending January 15th.
A breakdown of the figures showed that re-sales of single-family homes decreased by 4.7 % to an annual rate of 4.05 million and sales of condos and co-ops dropped by 10 % to 440,000. Purchases declined in three of four regions with the Northeast showing the biggest drop which was 15% but the pace of sales was unchanged in the West.
According to the NAR (National Association of Realtors) the median home price dropped by 15% from a year ago to a six-year low of $170,300 and distressed properties accounted for 45% of all sales.
Many economists forecast re-sales would rise to around a 4.79 million annual rate from 4.74 million in December and estimates ranged anywhere from 4.5 million to 4.91 million but sales were down by 8.6% compared with a year earlier and the number of unsold homes on the market at the end of January represented a 9.6 month inventory based on the current rate of sales.
Carl Riccadonna, who is a senior economist at 'Deutsche Bank Securities' stated, "It's going to be very difficult for the housing market to find its footing with the unemployment rate continuing to trend higher. There is a huge inventory overhang, so we need prices to come down further" and Ethan Harris, who is the co-head of economic research at 'Barclays Capital Inc.' said, "This is actually a very disappointing set of numbers. We're still in this phase of the recession where it's really kind of a dramatic pulling back in purchases of big-ticket items, due to a tremendous loss of confidence in the economy".
The competition from distressed sales is hurting builders and Ken Campbell who is the Chief Executive Officer of 'Standard Pacific Corp' issued a statement saying, "We saw our sales absorption rate, our cancellation rate and general traffic levels deteriorate beyond normal seasonal changes" and went on to say that he "expected home prices to decline further".
Federal Bank Chairman, Ben S. Bernanke stated yesterday that the U.S. economy is in a "severe contraction" and warned that the recession may last well into 2010.