Home sales rise in December as buyers grab at bargain prices
— -- Existing-home sales showed unexpected improvement in December, driven by much-reduced prices in the West and lower interest rates.
Home sales rose 6.5% to a seasonally adjusted annual rate of 4.74 million properties in December from 4.45 million in November, according to a report Monday by the National Association of Realtors (NAR). Economists had been predicting a drop of around 4%.
"It looks like, especially out West where prices are collapsing, that lower prices and lower mortgage rates are generating demand," says Joel Naroff of Naroff Economic Advisors.
Sales rose 0.5% in September 2008; however, the December gain was the biggest since January 2002.
What's behind the recent rise:
•Low prices. The uptick in sales was driven especially by home buyers in California, Nevada, Arizona, Florida and other distressed markets where home prices have tumbled. Those are also where foreclosure rates have been highest.
Sales were up 13.6% in the West, 7.4% in the South and 4.0% in the Midwest, but slipped 1.4% in the Northeast.
The national median home price was $175,400 in December, which is 15.3% below December 2007, when the median was $207,000.
•Lower interest rates. For those who qualify, interest rates are still at historic lows — making it a tantalizing time to buy. Interest rates on a 30-year, fixed loan were 5.12% for the week ended Wednesday, according to Freddie Mac.
Benjamin Roberts, 32, an account executive at e3communications, plans to close on an 1875 Italian-style fixer-upper in Buffalo next month.
"I've been looking for a while and it was scarier when the market started going down, but I got a 4.5% fixed rate," says Roberts, a first-time buyer.
Sales could continue to rise if buyers' insecurities are allayed by passage of an economic stimulus package, says Lawrence Yun, NAR chief economist.
Nevertheless, troubling signs persist. Mortgage applications as a whole decreased for the week ended Wednesday.
And despite the pickup in home sales, sales are still anemic: Existing-home sales in December were 3.5% below the 4.9 million pace in December 2007, NAR reports. For all of 2008, sales were 13% below transactions recorded in 2007.
Related Stories
ABC News Live