I agree that the December existing home number is a statistical aberration, but that is not the point. The issue remains that the current trend in joblessness is still a big drag on the economy and the government can’t prop up the housing market forever.
Earlier today the NAR reported that sales of existing U.S. homes plunged almost 17% in December. The decline was more than a Bloomberg survey and the biggest decline since records began in 1968. The decline comes one month after a government tax credit was originally due to expire. Congress extended the first-time buyer credit to cover deals signed by April 30, 2010 and closed by June 30 2010, and expanded it to include current homeowners.
What is clear from the December existing home number is that the original tax credit measure pulled sales forward. The current program will have the same effect in 1H10, and sales will begin to fall off again in June 2010.
With Washington propping up the housing market it is nearly impossible to say with any certainty that the housing market is recovering. As we said last week when the housing “starts” was reported, the government has put a floor under the housing market. The “bottoming process” for housing will take time and future growth is dependent on job creation, not government stimulus measures.
Howard Penney
Managing Director
