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The third-straight drop in sales on a month-to-month basis was unexpected. “The housing market remains very, very distressed,” wrote Dan Greenhaus, chief economist for Miller Tabak & Co.

“There may have been some weather-related issues playing havoc with the sales data but clearly, these results are extremely unnerving,” wrote Jennifer Lee, an economist for BMO Capital Markets. “There is nothing positive to glean from this report.”

U.S. stock markets fell after release of the report, which coincided with release of congressional testimony by Federal Reserve Chairman Ben Bernanke, who said the economy remains fragile and needs low interest rates for an extended period of time.

Data on sales for December 2009 were revised higher to a seasonally adjusted annual rate of 348,000, up from 342,000 previously reported.

Sales of new homes are down 6.1% compared with January 2009’s 329,000 units, which was the previous record low. The number of homes for sale rose 0.4% to 234,000 in January. At the January sales pace, it would take 9.1 months to sell that inventory, up from 8.0 months in December and the highest monthly supply since May.

Government statisticians have low confidence in the monthly report, which is subject to large revisions, and large sampling and other statistical errors. In most months, the government isn’t sure whether sales rose or fell. The standard error in January for instance, was plus or minus 14%. The government says it can take up to five months to establish a statistically significant trend in sales. Over the last five months, sales have been on a 362,000 seasonally adjusted annual pace, down from 382,000 in the five-month interval through December.

Sales had risen fairly steadily in the first half of 2009 before plateauing last fall. Seasonally adjusted sales have now fallen three months in a row.

With mortgage rates still very low and prices down, most analysts had concluded that the recent decline in sales was due to the impending expiration of the first-time home buyers’ credit in November.

As it happened, Congress extended the tax credit through June and expanded it to include repeat buyers. But the tax credit didn’t help sales in January. Sales of new homes are recorded once a sales contract is signed, not at closing. Some homes are sold before ground is broken on construction.

Details
Home builders had been slashing their inventory of unsold homes for more than a year to a 38-year low before January’s 1,000 increase. The number of homes for sale that are under construction fell to a record low of 100,000.

Builders have cut back on production of new homes, but they still face headwinds from unsold existing-homes as foreclosures continue to mount up. If a home isn’t sold before it’s finished, it’s taking a record 14.2 months to sell it after completion—a reflection of the mismatch between more expensively priced homes in the inventory and lower-priced homes that have been selling.

The median sales price of a new home sold in January was $203,500, down 2.4% compared with a year earlier. Cheaper homes were selling better than expensive ones: 47% of sales were for less than $200,000, up from 43% in December. Meanwhile, 38% of sales were for $200,000 to $400,000, down from 41% in December.

Sales were down in three of four regions: down 35% in the Northeast, down 12% in the West and down 10% in the South. January’s sales were up 2% in the Midwest, the government’s data showed.

(c) 2010, MarketWatch.com Inc.

Associated Press

January's significant drop in pre-foreclosures is the indicator many metropolitan Phoenix housing-market watchers have been anxiously looking for during the past several months.

For the first time since November 2008, the monthly tally of Valley homeowners to fall behind on their mortgages and face foreclosure is below 7,000. Actual foreclosures dropped as well, although their decline wasn't as dramatic.

Metro Phoenix foreclosures, or trustee sales, dipped to 4,452 during January. That's down from the 5,244 homeowners who lost houses to foreclosure in December.

Monthly foreclosures have been hovering between 3,800 and 5,300 during most of the past 18 months, except in April, when they fell to 3,100. That drop was due mostly to a short-term federal moratorium on foreclosures.

Last month's drop in foreclosures could signal more successful loan modifications. The drop in pre-foreclosures could signal that more homeowners were able to make their payments or that lenders are being more proactive and working with struggling homeowners before they fall behind on their payments. February's foreclosure activity could cement or reverse either trend.

Loan legislation

A bill has been introduced to prohibit excessive fees on mortgages and the issuance of certain types of high-cost home loans in Arizona.

Senate Bill 1288, introduced by Sen. John Nelson, R-Glendale, calls for limiting negative-amortization mortgages as well as balloon payments and pre-payment penalties on most other mortgages. The Arizona attorney general backs the legislation, which is aimed at preventing another foreclosure crisis in the state.

Courtesy of azcentral.com