WASHINGTON — Sales of existing homes posted an unexpected increase last month, as consumers snapped up bargain-basement foreclosures in California and Florida, closing out the worst year for the U.S. real estate market in more than a decade.
Analysts, however, cautioned that prices are likely to keep falling through 2009, and said the outlook for home sales is highly uncertain, despite a boost from low mortgage rates.
"I don't think we're close to a bottom yet," said Michelle Meyer, a Barclays Capital economist who sees nationwide prices falling an additional 15 percent this year. "We're still very far away from a normal housing market."
While sales boomed last month in Los Angeles, San Diego and Las Vegas, they sank in cities with formerly healthy markets, such as Atlanta; Charlotte and Raleigh, N.C.; Seattle; and Portland, Ore., according to the Associated Press-Re/Max Monthly Housing Report, also released Monday.
The Greater Nashville Association of Realtors said home sales dropped 33 percent from December 2007 to December 2008.
If President Barack Obama's administration enacts a plan to keep borrowers in their homes, analysts said, the number of foreclosures on the market might decline, but it's still unclear how successful any government efforts will be.
Sales of existing homes rose 6.5 percent to an annual rate of 4.74 million in December, from a downwardly revised pace of 4.45 million in November, the National Association of Realtors said Monday. Without adjusting for seasonal factors, sales nationwide were up 1.1 percent from a year earlier, reflecting a surge of more than 36 percent in the Western states.
Some in the real estate industry were encouraged by the surprising jump in sales and a big decrease in the number of homes for sale. "It looks like we are hitting bottom" in sales, said Ronald Peltier, chief executive of HomeServices of America Inc., which owns real estate agencies in 19 states.
Interest these days is coming from prospective buyers like Todd Kuhn of Richmond, Va., who waited until prices dropped to a more affordable level before starting to look in earnest. Kuhn and his wife, parents of a 14-month-old daughter, have visited about 20 homes this month.
"I see this as the first real opportunity that we've had ... at, hopefully, the bottom of the market," said Kuhn, 34, a dentist. "I know that the economy is going to turn around someday. Hopefully we'll be well positioned for that."
Home prices in Seattle are falling and foreclosures have picked up, but sales are still sluggish and listings are languishing on the market for six months or more, said Gary DeRosa, a Seattle-based real estate agent with ZipRealty Inc.
"Even though the sellers may be reducing their prices, the buyers are still coming in at 5 to 10 percent below the market price," DeRosa said.
The nationwide median sales price plunged to $175,400 last month, down 15.3 percent from $207,000 a year ago.
That was the lowest price since May 2003 and the biggest year-over-year drop on records going back to 1968.
In Nashville, the median sales price for a single-family home was $163,750 in December, the lowest price for the month since 2004.
Prices may keep fallingWith sales of foreclosures and other distressed properties making up about 45 percent of sales, many economists expect prices to keep falling.
For all of 2008, there were 4.9 million existing home sales, down more than 13 percent from a year earlier, and the lowest total since 1997.
Making matters worse, layoffs continue to accelerate as the recession deepens.
Experts say that when the housing market turns around, price increases are likely to be modest.
"We have another year to go of soft home prices, primarily at this point because of the recession and job losses," Norm Miller, a real estate professor at the University of San Diego, said in an interview last week.
In one encouraging sign, the number of unsold homes on the market last month fell nearly 12 percent to 3.7 million, the lowest level since January 2007. At the current sales pace, it would take 9.3 months to sell all of the properties, down from 11.2 months in November.
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