Economy Watch: Existing Home Sales See December Rise

January 23, 2012
By Dees Stribling, Contributing Editor

Image courtesy Flickr user titanequities

Existing home sales rose 5 percent month-over-month in December, according to the National Association of Realtors on Friday, to an annualized rate of 4.61 million units, which for NAR purposes includes everything — single-family housing, condos, townhouses and co-ops. For all of 2011, existing-home sales rose 1.7 percent to 4.26 million units from 4.19 million units in 2010. Not much of an increase over a truly crummy year, but an increase is an increase.

NAR also reported that the total U.S. housing inventory at the end of December was 2.38 million existing homes available for sale, which represents a 6.2-month supply at the current rate of sales, down from a 7.2-month supply in November, a drop of 9.2 percent. Available inventory has trended downward consistently since setting a record of 4.04 million units in July 2007, and is at the lowest level since March 2005, when there were 2.3 million homes on the market, the organization says.

Home prices continued to edge downward during 2011, the Realtors added. By the organization’s reckoning, the national median existing-home price was $164,500 in December, 2.5 percent below the median in December 2010. Still driving the downward pressure on prices is foreclosures, which, along with short sales, accounted for 32 percent of sales in December (19 percent were foreclosures and 13 percent were short sales), up from 29 percent in November; such distressed sales were 36 percent of total sales in December 2010.

ECRI Lending Index Rebounds Since Last Summer

In another indication that optimism regarding the U.S. economy took a beating last summer as Congress threatened to let the United States default, the Economic Cycle Research Institute, a New York-based independent forecasting group, said on Friday that its Weekly Leading Index for the week ended Jan. 13 climbed to 123.4. That’s the highest level for the index since August, and up from a revised 121.1 the previous week.

Weekly economic indicators have a way of being volatile, but it’s nevertheless telling that the the ECRI’s index is just now climbing out of a trough that began in August. Also, the index’s annualized growth rate improved last week to its highest level since September at minus 7.5 percent, up from minus 8.6 percent–not a terrific reading, but still a sign that the U.S. economy has gotten past the near-default and the credit downgrade of mid-2011.

Greeks, Creditors Spend the Weekend Talking About Haircuts

The latest chapter of the Greek debt saga see-sawed throughout the weekend: agreement between the Greeks and their creditors was near, then it wasn’t, then it was again, and by Sunday — the definitive latest word was maybe. At stake is the next payment of the bailout money to the Hellenic Republic from the EU and the IMF. If Greece’s creditors can be persuaded to take that 50 percent, Mohawkish haircut, and also accept low interest rates on the remaining debt, then the bailout will go through, Greece will be able to pay its bills for a while, and the can will be kicked down the road some more.

If the deal doesn’t go through, Greece will surely default on its debts, and then what? Some see a 2008-style panic, others are more sanguine. The fact is that no euro-zone nation, even one with a smallish economy like Greece (the size of Maryland’s, give or take a few billion euros), has ever defaulted on its euro-denominated debts. Thus a default would be sailing into uncharted waters, which is something known to make investors, employers and consumers nervous.

Wall Street ended mixed on Friday, with the Dow Jones Industrial Average gaining 96.5 points, or 0.76 percent, while the S&P 500 eked out a tiny 0.07 percent gain. The Nasdaq, on the other hand, lost a negligible 0.06 percent.