Home sales rose 17.1 percent across the nation in December 2009 compared to the same month in 2008, according to the REAL Trends Housing Market Report. This gain came despite the loss of urgency from first-time homebuyers since the related tax credit that was set to expire at the end of November was extended through April 2010. More surprising is that the average price of homes sold rose 0.6percent – the first gain in over four years.
Every region of the country showed gains in home sales with the Northeast leading with an increase of 29.8 percent in units. The Midwest was next with unit sales up 19.2 percent over the same month a year ago. On the price front, the average price of homes sold rose 2.1% in the Midwest its best showing since 2005 and the South showed a price gain of 0.9 percent from December 2008 to December 2009. Only the Northeast showed
a price decline and it was only 1.3%.   

“While the results for December 2009 were down substantially from November 2009, the fact that every region showed double-digit improvement in sales and that sales prices actually went up marginally shows evidence that the housing market is beginning the process of stabilization,” said Steve Murray, editor of REAL Trends and author of the REAL.

Trends Housing Market Report. Many forecasts predicted a sharp slowdown in December sales and virtually no forecasts indicated an increase in the average prices of homes sold.

Other factors that may have boosted housing are the rise in mortgage rates over the past months that is usually a signal for consumers to act and the high rates of affordability that continue to exist in most markets. It is also recognized that the fourth quarter of 2008 and first quarter of 2009 were the worst quarters for housing sales so that the November and December 2009 results, while very strong and encouraging, were in comparison to some of the worst months in housing sales recorded in the last decade.

What will 2010 bring?
Many analysts expect that these results will weaken somewhat in the next few months, however the upturn trend should continue. The first quarter is historically a slow period for home buying, but the extended deadline for the homebuyer tax credit until April 30, which is when first-time homebuyers and eligible existing homeowners need to be under contract in order to qualify for the tax credit should help a lot. Home builders are also more optimistic. The recent survey found that shoppers across the U.S. have been out in greater numbers and seem more serious about buying. “Consumers are starting to feel a little more comfortable” that the worst of the job losses are past, said one of the builders.

In the past months supply of homes for sale dropped sharply across the U.S. The supply would last four months or less in the Boston, Sacramento, San Diego and San Francisco areas. A six-month supply is consider balanced between buyers and sellers.

Prices continue to stabilize in much of the nation. The most current survey shows that price index increased in November 2009 by 0.2% from October on seasonally adjusted basis. It was down 5.3% from a year earlier and was about 29% below the peak set in 2006.

In Las Vegas, the index was up 0.1% from the previous month, but still down 56% from the peak in 2006.

Jobs and mortgage rates will shape the housing market this spring, the busiest time of year for home shoppers. Without a return of job growth, it will be hard to sustain demand and mortgage defaults will lead to more foreclosures, dumping more supply on the market. Just in Miami, Florida, about 28% of mortgage borrowers are behind on payments or in foreclosure, compared with 13.2% with the entire U.S.  More foreclosures could soon put downward pressure on prices.

Across U.S. more than seven million households are behind on mortgage payments or in foreclosure, and lenders eventually will put many of these homes on the market. Unless the job market improves, it will be hard to find buyers for all those homes and prices could again dropped further.
Banks have not even started the foreclosures process – which often takes more than a year-for about 2.5 million households that are more than 90 days behind on payments. It is not clear how many of those borrowers could be saved through loan modifications that cut payments.
Meanwhile, though the lower end of the housing market has generally improved over the past year, the market for higher-priced homes remains weak and predictions are that this segment of housing market will suffer throughout the entire 2010.