U.S. home purchases jump in December, but at fire-sale prices

Existing home purchases jumped unexpectedly in December in the United States, but mainly because sellers were dumping their houses at rock-bottom prices, according to figures released Monday.

The number of older homes that changed hands in the last month of the year rose 6.5 per cent from November, said the National Association of Realtors.

December became the first month in the last quarter of the month to show a gain in the number of existing home sales.

Still, however, that positive news was tempered by the fact that more almost half of those sales were at distressed prices, implying that sellers needed to dump their homes.

"There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 per cent of transactions; the median is where half of the homes sold for more and half sold for less," said the NAR in a press release containing the December figures.

Compared with December 2007, the number of existing home sales was down 3.5 per cent, and the median home price was off more than 15 per cent, slumping to $175,000 US.

By contrast, the average price for a Canadian home in December was off 11 per cent at $281,000 compared to the same month one year earlier.

Although the December numbers showed an increase in the United States, few analysts viewed the upwards trend as a sign that the housing market is recovering.

"The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions," said Lawrence Yun, the NAR's chief economist. "Buyers will continue to have an edge over sellers for the foreseeable future."

Other experts see the plethora of bad news in terms of record mortgage foreclosures and rising unemployment as the dominant trend in the U.S. housing market.

"Mortgage delinquency and foreclosure rates soared to record highs in Q3," said Ed Kashmarek, economist with Wells Fargo & Co., a bank that specializes in the housing market, in a December commentary.

"This, along with the horrendous job losses in Q4, suggests a housing recovery may be quite a way off."