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U.S. home resales drop almost 17% in December

It's the biggest month-over-month decline for previously owned homes since the National Assn. of Realtors began tracking sales 42 years ago. California fares better than the rest of the nation.

Sales of previously owned homes nationwide plunged steeply in December, raising concerns that the housing recovery could lose steam after government policies intended to support it expire in the spring.

For now, California appears to be bucking the downward trend.

U.S. sales in December fell to a seasonally adjusted annual rate of 5.45 million units, down 16.7% from November, the National Assn. of Realtors said Monday. It was the biggest drop in the 42 years that the group has been measuring home sales and comes after first-time home buyers raced to close on their purchases before a federal tax credit of up to $8,000 for first-time purchasers was set to expire Nov. 30.

Congress in early November extended the deadline to April 30 and expanded the credit to include up to $6,500 for some buyers who already own homes. The renewal didn't pull in as many buyers in December, with first-time buyers declining to 43% of all buyers in December from 51% in November, according to a survey by the Realtors group.

"People bought homes in October and November thinking that the tax credit would expire at the end of November, and therefore the decline in December is just a reflection of that," said Mark Zandi, chief economist at Moody's Economy.com. "It does highlight a broader point that the housing market is on government life support, and when it is taken off that support, it weakens."

A slew of federal policies -- including the tax incentives for buyers, low interest rates driven down by Federal Reserve actions and increased access to mortgages backed by the Federal Housing Administration -- bolstered the nation's housing recovery last year.

But those props eventually will end: The tax credits expire in April, many economists expect interest rates to rise again this year and the FHA is tightening its lending standards. The question remains whether home sales and prices will fall without the government's help.

Lawrence Yun, chief economist of the Realtors association, said home sales were likely to pick up again in April once the new deadline approached, but the outlook beyond that was unclear as a potential new wave of foreclosures and stubborn unemployment could stymie any recovery.

"By early summer, the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010," Yun said in a statement. "However, the job market remains a concern and could dampen the housing recovery -- job creation is key to a continued recovery in the second half of the year."

The national median price for all previously owned homes was $178,300 in December, 1.5% higher than in December 2008. The median is the point at which half the homes sold for more and half for less.

Sales for the full year increased 4.9% to 5.16 million compared with 2008, the first annual gain since 2005.

Housing in California appears to be faring better than the rest of the nation despite higher unemployment.

Sales of previously owned homes in the West fell 4.8% in December from November, compared with a decline of 19.5% in the Northeast, a 25.8% drop in the Midwest and a decline of 16.3% in the South, the national group said.

In California, resales rose 4% from the previous month, according to figures released last week by the California Assn. of Realtors.

A separate report by the research firm MDA DataQuick of San Diego, which tracks sales of all homes, also showed the Southern California, San Francisco Bay Area and statewide housing markets gaining ground in December.

"Particularly in California, there is a lot of investor demand for a lot of the foreclosed properties and short sales," or homes sold for less than the value of their mortgages, Zandi of Moody's Economy.com said.

"It goes to a different psychology in much of the California market," he said, "where I think home buyers are conditioned to believe that if they buy in times like these, when prices are low, they will be rewarded in the long run."

Glenn Kelman, chief executive of the online brokerage Redfin, said the Los Angeles area posted strong sales in December as well as the first two weeks of January.

"The December uptick in rates freaked out buyers a little bit and got them moving again," he wrote in an e-mail. "If rates keep going up, at some point buyers won't be motivated; they'll just be scared off. But at least for the first half of January, we saw more people than we ever have ask to go on their first home tours with us, which is an early but fairly reliable indicator of strong demand."

Robert Kleinhenz, deputy chief economist for the state Realtors group, said another reason for the state's progress was that buying a home has become increasingly affordable relative to household income in the state over the last few years. According to the group's affordability index, 64% of households could afford to buy a home at the end of the third quarter of last year compared with a historic low of only 26% in the second quarter of 2006.

"We had much steeper price declines than what occurred nationally, and I think that has been continuing to drive sales," he said. "Our affordability factors are much, much better than just a few years ago, and, relatively speaking, that improvement was far more dramatic here in California."

Bringing the Dream of Homeownership Within Reach

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.

Here is more information about how the 2009 First-Time Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Breaking news: HUD: Home Buyer Tax Credit Loans Still on Track (REALTOR® Magazine)

Who Qualifies?

First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?

The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.

The buyer's income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Easy Storage Ideas to De-Clutter Your Home

A key element in staging a home for sale is to make it look clean, spacious, and presentable.

Learn how to clear the clutter with these quick and easy storage solutions that keep your home looking its best and make moving day a breeze at the same time.

Storage Bench or Seat: Buy an attractive storage bench or seat to store toys, pet items, and garden tools in a great looking container that adds a decorative element to the space. Outdoor PVC garden benches are an easy alternative to keep a patio or porch tidy, while a toy box in each bedroom makes quick work of preparing bedrooms to be shown on short notice. Best of all, storage benches make light work of packing when moving day arrives.

Bright Boxes: Purchase bright colored storage boxes to use on shelves or inside cabinets to reduce the appearance of clutter.

Overhead Storage Systems: Add inexpensive overhead storage systems to the garage, shed, or even bedrooms. Sturdy and easy-to- install ceiling mounted storage systems keep walkways free of debris, especially in cluttered spaces like the garage. Add colorful ribbons or bright decorations to create the perfect place for stuffed animals, games, or other infrequently used toys in bedrooms.

Racks: From bikes to hats, there is a rack for every reason, so chances are your home could benefit from a few well positioned and inexpensive racks too. Some of the more popular racks include bike racks, multimedia racks, coat and hat rack, laundry racks and of course – spice racks. Remember, potential buyers are likely to search every inch of your home including closet space, cabinets, and storage sheds to determine if their own belongings will fit. Stay prepared by presenting your home in the best light possible by putting everything in its place.