Free forex

WASHINGTON (Thomson Financial) - Existing home sales in the US fell dramatically in December, and left 2007 as the worst year on record for US home sales and prices in almost four decades.

The National Association of Realtors (NAR) said existing home sales were down 2.2 pct in December to a 4.89 mln unit annual rate. For all of 2007 they fell 12.8 pct to 5.65 mln units. Economists were predicting a 4.95 mln unit annual sales rate for December.

The NAR also reported that 2007 had the first ever annual decline in the median price of existing homes since it began tracking the data combining condo and single-family home sales in 1998 -- down 1.4 pct to 218,900 usd.

For single family homes exclusively, it was the first annual price decline since 1968, down 1.8 pct to 217,800 usd. Single family sales for the year fell 13 pct, their worst performance in 25 years.

In just the month of December, single-family sales were off 2 pct to a 4.31 mln unit rate, with a 6.5 pct year-over-year price decline to 206,500 usd.

"Every region posted a relatively modest drop, indicating the problems are still widespread," said Joel Naroff of Naroff Economic Advisers. Sales were down 4.6 pct in the Northeast, 2.1 pct in the West, 1.7 pct in the Midwest and down 1.0 pct in the South.

On today's data, the NAR's chief economist Lawrence Yun noted that sales had at least been in the 5 mln annual unit range for the last four months, "which may be hinting we're at a bottom," although it "may be too early to say," as well.

Michael Moran of Daiwa Securities wouldn't go that far, but "the results of the past few months, in total, show a noticeable slowing in the rate of decline," he said. "This does not necessarily suggest that a bottom is forming in the market. Nevertheless, the recent data suggest some improvement in the tone of the market. Sales plummeted in 2006 and much of 2007, but the recent adjustment has been subdued by comparison."

The backlog of unsold homes at the end of December had fallen 7.4 pct to a 9.6 months supply after three months in a row above 10. That's "good news from the inventory front," according to Jennifer Lee of BMO Capital Markets. "Don't get me wrong, she said, "this is a still-high read but an improvement nonetheless. The number of homes available for sale fell to 3.32 mln, still well above the 25-year average of just over 2.2 mln but down from July's peak of 3.83 mln units."

Economists have said the home sales aren't likely to begin a recovery until the supply overhang drops sufficiently that potential buyers stop waiting for prices to fall further.

Tony Crescenzi of Miller Tabak does see some progress on the inventory overhang of both new and used homes. He points out that the total number of new dwellings being added annually has dropped to a net of about 700,000 as builders cut back. But, "the amount of new dwellings needed each year is roughly 1.1 or 1.2 mln because of increases in household formation related to population growth.

"This means that the amount of new construction is running about 400-500,000 below the level of household formation, an amount that will take a significant bite out of the level of excess inventories" -- eventually.

RBS Greenwich Capital's Stephen Stanley expects the decline in home sales to last through the winter, "but we continue to believe that a bottom will be found in the spring. Still, instead of a sharp rebound, as is typical after housing cycle bottoms, we foresee resales dragging along the bottom for an extended period, as the sector continues to work out its pricing and inventory issues."