January existing home sales fall by 5.3%

Sales of existing homes unexpectedly plunged in January to the lowest level in nearly 12 years as pessimism about the economy grew and buyers waited for President Obama’s plan to help revive the U.S. housing market.

The National Assn. of Realtors said Wednesday that sales of existing homes fell 5.3% to an annual rate of 4.49 million last month, from 4.74 million in December. It was the weakest showing since July 1997, and some analysts don’t see sales bottoming out until later this year as prices continue to sink. Sales had been expected to rise to an annual pace of 4.79 million homes, according to Thomson Reuters.

Without adjusting for seasonal factors, sales nationwide fell 7.6% from a year earlier. The West was the only part of the country to show increased sales.

Sales had surged in December, providing some hope that the long-awaited housing-market bottom was in sight. But economic fears are now paramount in the minds of many consumers.

The median sales price in January plunged to $170,300, down 14.8% from $199,800 a year earlier and from $175,700 in December. It was the lowest price since March 2003 and the second-largest drop on record.

The number of unsold homes on the market fell almost 3% last month to 3.6 million, the lowest inventory level in two years. But because of the slumping sales pace, it would still take 9.6 months to rid the market of all of those properties, up from 9.4 months in December.

The number of properties languishing on the market probably would be higher if sellers weren’t so reluctant to list their properties as prices sink rapidly, Joshua Shapiro, chief U.S. economist with MFR Inc., wrote in a note Wednesday.

“With supply overhang still huge and mortgage financing difficult to obtain, home prices are likely to decline considerably further in the quarters ahead,” he wrote.

Foreclosures have swamped the market -- especially in particularly distressed states like California, Florida, Nevada and Arizona. The Realtors group estimates that about 45% of sales nationwide are foreclosures or other distressed properties.

That’s great news for buyers, who are paying the most affordable prices in years. Another boost: the combination of low interest rates and the $8,000 first-time home buyer tax credit tucked into the economic stimulus plan signed by Obama this month.