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Thursday Feb 26, 2009

US existing home sales fall 5.3 percent in January

WASHINGTON, Feb 25, 2009 (AFP) - US existing home sales fell 5.3 percent in January as potential buyers waited to see the impact of the government's economic stimulus package, a real estate industry group said Wednesday.

The National Association of Realtors (NAR) said sales fell to a seasonally adjusted annualized rate of 4.49 million units, from a level of 4.74 million units in December, amid the severe and prolonged slump in the real estate sector.

The decline confounded analysts' consensus forecast of a rise for a second straight month, after December sales unexpectedly rose on the back of plunging home prices and soaring foreclosures.

On an annual basis, sales of single-family homes last month were 8.6 percent lower than in January 2008.

"Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus," said Lawrence Yun, NAR chief economist.

"The housing market will soon get a lift from very favorable buying conditions -- not only from improved affordability, but also from the stimulus of an 8,000-dollar first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates," he said.

The new tax credit is part of the 787-billion-dollar stimulus package signed into law by President Barack Obama on February 17, designed to create or save 3.5 million jobs and end the worst US economic crisis since the 1930s.

The Democratic president also this month unveiled a housing rescue plan aimed at staving the rising flood of foreclosures, making mortgages more affordable and stabilizing the housing market.

In his first address to Congress late Tuesday, Obama focused in part on the crucial need for a housing recovery to pull the world's largest economy out of a second year of recession.

NAR president Charles McMillan, a broker in Dallas-Fort Worth, Texas, welcomed Obama's initiatives to revive the moribund real-estate sector.

"Housing is the key to revitalizing America and we pledge to work with him to help jumpstart our economy," McMillan said.

NAR said that existing home prices in January continued to fall, with the median price down 14.8 percent in January from a year ago at 170,300 dollars.

"A high prevalence of distressed home sales, and of those in lower price ranges, has skewed the median price to be markedly lower than under normal market conditions," NAR said.

Inventory dropped 2.7 percent to a two-year low of 3.60 million units. At the January sales pace, it would take 9.6 months to sell all the existing homes on the market, up from a 9.4-month pace in December.

Inventory has declined steadily since peaking in July 2008 and is at the lowest level in two years.

NAR also issued its regular February revisions of historical data. In 2008, sales of existing homes plunged to 4.35 million units, a drop of 11.9 percent from the previous year.

IHS Global Insight analyst Patrick Newport said a turnaround in home sales was likely later this year, assuming the financial markets continued to stabilize and that banks increased lending volume.

"But as (Federal Reserve chairman) Ben Bernanke pointed out in his monetary policy report yesterday, if the financial system remains gridlocked, the economy -- and housing -- will remain in remain in recession this year," Newport said.

hh-vs/rl - AFP

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