Monday, January 25, 2010

Home sales in Colorado, U.S. fall

The media coverage of recent home price and home sales data released by the Colorado Association of Realtors was extremely light, so we've provided a summary of the data below:

Home sales in Colorado, U.S. fall

Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.

Nationwide, purchases slumped 17 percent from November to December after a government tax credit was originally due to expire, the biggest decline since records began in 1968, to a 5.45 million annual rate, the National Association of Realtors said today in Washington, D.C. The median sales price increased for the first time in two years.

The report reflects a sharp drop in demand after buyers stopped rushing to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.

Comparing year-over-year, however, sales increased from November to December as totals rose 15 percent from 4.7 million to 5.4 million nationally.

Nationally, sales are now up 21 percent from the bottom a year ago, but down 25 percent from the peak more than four years ago.

In Colorado, home sales fell 16 percent from November to December, reflecting the same tax-credit-driven dynamic as was found at the national level. According to data released Friday by the Colorado Association of Realtors, year-over-year comparisons for December showed home sales totals declining by 2 percent.

In contrast to home sales totals, home price data showed growth across the board. In Colorado, median home prices rose 9 percent from $220,656 in November to $239,844 in December, and were up 18 percent year-over-year from $204,122 in December 2008 to $239,844 in December 2009.

Nationally, Home prices were up 5 percent from $170,000 in November to $178,300 in December. Comparing year over year, the median sales price was $178,300, up 1.5 percent from $175,700 a year earlier and the first yearly gain since August 2007. However, some of that increase could be due to a drop-off in purchases from first-time buyers who tend to buy less expensive homes.

The recent data reinforces common sentiment among some economists that the market has bottomed out, and has expanded since 2008, but uncertainty remains over the health of the market in the short term. Growth in home sales and in prices has been recently fueled by the home purchase tax credit and by low interest rates. Low interest rates have been made possible in part by widespread purchasing of mortgage-backed securities by the Federal Reserve. It is unclear how much strength the home market will show once the Fed backs off its purchases, interest rates increase, or the tax credit expires.

The big question hanging over the housing market this spring is whether a tentative recovery will stumble after the government pulls back support. The Federal Reserve's $1.25 trillion program to push down mortgage rates is scheduled to expire at the end of March—a month before the newly extended tax credit runs out.