Sales of previously occupied homes took a large drop for the second straight month in January, falling to the lowest level since summer. It was another sign the housing market's recovery is faltering.
The National Association of Realtors said sales fell 7.2 percent to a seasonally adjusted annual rate of 5.05 million from a downwardly revised pace of 5.44 million in December.
The results, the weakest since June, were far worse than forecast. Economists expected a slight increase to a rate of 5.5 million.
The report "is certainly not good," said Lawrence Yun, the trade group's chief economist.
Sales declined throughout the country, falling the most — nearly 11 percent — in the Northeast. Sales fell by about 7 percent in the South and Midwest and by more than 5 percent in the West.
Potential buyers have left the market this winter because the deadline for a tax credit for first-time buyers was extended. It had been set to expire on Nov. 30, but Congress extended the deadline until April 30 and expanded it to existing homeowners who move.
"We hope that there will be another surge come late spring" as the new deadline nears, Yun said.
The median sales price was $164,700, unchanged from a year earlier and down 3.4 percent from December.
The inventory of unsold homes on the market was down slightly at 3.27 million. That's a 7.8 month supply at the current sales pace, up from a recent low of 6.5 months in November.
The bleak report comes after the government reported Wednesday that sales of newly built homes plunged 11 percent to a record low in January. The report, which measures signed contracts to buy homes rather than completed sales, also came as surprise to economists.
The main question hanging over the housing market this year is whether interest rates will rise, and by how much. The Federal Reserve's $1.25 trillion program to push down mortgage rates is scheduled to expire on March 31.
After that program runs out, mortgage rates should not spike, but rather rise gradually to about 6 percent over the next year, predicts Cameron Findlay, chief economist at LendingTree.com. That will mean homebuyers may have to reduce their price range, and could put downward pressure on prices.
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