2010 Weakest Year for Home Sales Since 1997

January 20, 2011 - 11:56 AM

home sales

In this photo taken Jan. 10, 2011, a sold sign is seen in front of a home, in Millis, Mass. Sales of previously owned homes dropped to the lowest level in 13 years in 2010 even though sales in December jumped to the fastest pace in seven months.(AP Photo/Steven Senne)

Washington (AP) - The number of people who bought previously owned homes last year fell to the lowest level in 13 years. But home sales in December jumped to fastest pace in seven months.

The National Association of Realtors says sales dropped 4.8 percent to 4.91 million units in 2010. That was slightly lower than 2008, which had been the weakest level since 1997.

Home prices have been depressed by a record number of foreclosures and high unemployment. Many potential buyers held off on purchases last year, fearful that prices hadn't bottomed out yet.

The poor year for sales ended strong in December. Buyers snapped up homes at a seasonally adjusted annual rate of 5.28 million units, an increase of 12.8 percent from November and the strongest sales pace since last May.

Still, many economists believe it will take years for sales to rise to a normal level of around 6 million units a year. And some say 2011 will be even weaker than last year because more foreclosures are expected and home prices are likely to keep falling through the first six months of the year.

The foreclosure crisis has left a glut of unsold houses on the market. That has played a major role in lowering home prices.

For December, the inventory of unsold homes stood at an 8.1 months supply, down from 9.5 months supply in November. That represents the amount of time it would take to sell the remaining supply of homes on the market at the December sales pace. A normal inventory supply is six months.

Even historically low mortgage rates have done little to boost the sales.

The average rate on a 30-year fixed mortgage rose to 4.74 percent this week from 4.71 percent the previous week, Freddie Mac said Thursday. The average rate on the 15-year loan, a popular refinance option, slipped to 4.05 percent from 4.08 percent.

The 30-year loan rate reached a 40-year low of 4.17 percent in November, and the 15-year mortgage rate fell to 3.57 percent, the lowest level on records dating back to 1991.

For December, sales were up in all parts of the country with the strongest gain a 16.7 percent increase in the West. Sales rose 13 percent in the Northeast, 10.1 percent in the South and 11 percent in the Midwest.

The median price for a home sold in December was $168,800, down 1 percent from a year ago.