BUSINESS
02/23/2011 11:57 am ET | Updated May 25, 2011

Existing Home Sales Rise, Prices Hit 2002 Low

WASHINGTON (Reuters) - Sales of previously owned U.S. homes rose unexpectedly in January, but prices tumbled to the lowest in nearly nine years, an industry group said on Wednesday.

The National Association of Realtors said sales climbed 2.7 percent month over month to an annual rate of 5.36 million units from a downwardly revised 5.22 million pace.

Economists polled by Reuters had expected January sales to fall 2.1 percent to a 5.24 million-unit pace from the previously reported 5.28 million units in December.

Compared with January last year, sales were up 5.3 percent. The median home price fell 3.7 percent from a year-ago to $158,800, the lowest since April 2002.

"I would have thought that the winter weather would have kept some buyers away from the market, it doesn't appear to have happened though and we're a little bit encouraged by it," David Resler, chief economist at Nomura Securities in New York.

The NAR has been accused of overcounting existing home sales. The Wall Street Journal on Monday quoted California real estate analysis firm, CoreLogic, as saying the NAR could have overstated home sales by as much as 20 percent.

NAR dismissed the claim and chief economist Lawrence Yun told reporters: "I would be highly surprised if it was 20 percent."

The NAR also revised the sales rates for the past three years, which showed 2010 sales little changed.

An overhang of foreclosed properties is casting a pall over the housing market, weighing down the sector even as the broader economy has entered a sustainable growth path. Housing was at the core of the worst recession since the 1930s.

The U.S. stock market held its slight losses on the data, while prices for safe-haven government bonds were little changed. The dollar fell against the euro.

CASH TRANSACTIONS ON THE RISE

Last month, distressed sales accounted for 37 percent of transactions, the highest in 12 months. First-time buyers accounted for just under a third of transactions in January, with all cash purchases making up 32 percent. Investors accounted for 23 percent of purchases in January.

The existing home sales report also showed the shift in housing becoming more pronounced, with sales of single family homes rising 2.4 percent and multi-family purchases surging 4.7 percent.

Demand for rental apartments is on the increase as prospective homeowners shy away from owning a property because of falling values and families lose their homes to foreclosure, boosting sales of multi-family homes.

Paul Dales, a senior U.S. economist at Capital Economics, estimates there is an oversupply of 850,000 homes on the market, with another 4.5 million properties in the foreclosure pipeline.

January's sales pace left the supply of existing homes on the market at 7.6 months' worth, the lowest since December 2009, down from 8.2 months' worth in December.

A month's supply of between 6-7 is generally considered as ideal, with higher readings pointing to lower house prices.

Standard & Poor's/Case Shiller said on Tuesday prices for single-family homes fell for a sixth straight month in December and warned that house prices could fall another 25 percent.

Applications for home loans rebounded last week as buyers rushed to take advantage of a slide in mortgage rates in the wake of the growing unrest in the Middle East, but demand is unlikely to be strong enough to prevent prices from falling further.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage purchase loans rose 5.1 percent to 184.1.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

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