Today, the National Association of Realtors reports that existing home sales fell off a cliff in December, dropping by a seasonally adjusted 17% from November. Still, that's 15% higher than December 2008, but the fewest sales since August. Should the decline worry us about the resilience of the housing market's rebound? I think so.
First, here's how bad December's drop looks in a chart:
The first response from housing market bulls might be that December is a bad month for home sales. True, but these numbers are seasonally adjusted already to account for that. Moreover, look above at the difference between November and December in 2008. Then, existing home sales actually increased in December by 4%. That's a much different story from the 17% decline in December 2009.
What I find most surprising about this drop is that December marked the first full month when the home buyers credit was opened up to current homeowners. Prior to that, only first-time buyers could qualify. I would have thought that this credit would appeal to the giant new population of potential buyers and would conjure up -- or at least pull forward -- some demand for home sales. This data indicates otherwise.
But the news isn't all bad. The median home prices increased by a whopping 5% in December. That's the first increase since May. And at $178,300 now, that median home price is the highest the U.S. has seen since July. But home price is a lagging indicator. It makes sense that prices were higher in December, given the steady sales growth from August through November. But considering the drastic drop in sales that December saw, I'll be surprised if that price continues to increase this month.
There's a bunch of other real estate market data coming out this week, including new home sales for December and the Case-Shiller Home Price Index for November. So it will be interesting to see how that data compares to this awful existing home sales number. But today's news certainly isn't positive for the housing market.