WASHINGTON - Sales of existing homes in the United States fell more than forecast in December, capping the biggest annual slump in 25 years and the first decline in prices since the Great Depression.
Purchases fell 2.2 percent to an annual rate of 4.89 million, the National Association of Realtors said yesterday in Washington. For all of last year, sales of single-family homes declined 13 percent and prices dropped 1.8 percent, the first decrease since records began in 1968 and probably the first since the 1930s, the group said.
Falling property values and stricter borrowing terms will lead to more foreclosures and depress housing for most of this year, economists said. Investors anticipate the Fed will cut interest rates again next week in an effort to prevent the downturn from exacerbating weakness in the broader economy.
"There is likely to be little or no increase" in gross domestic product this quarter, Harvard University economist Martin Feldstein told the Senate Finance Committee yesterday. "The probability of a recession in 2008 now exceeds 50 percent. If it occurs, it could be deeper and longer than the recessions of the recent past."
Economists had forecast sales to fall to a 4.95 million annual rate from November's previously reported 5 million pace, according to the median estimate of 71 economists in a Bloomberg News survey.
A separate report yesterday showed fewer Americans filed first-time claims for unemployment benefits last week. Initial jobless claims decreased 1,000 to 301,000, the lowest in four months, indicating companies are reluctant to fire workers until they get a better read on the economic slowdown.
Resales of homes fell in all four regions let by a 4.6 percent decline in the Northeast.
The combined median sales price for homes and condominiums last month fell 6 percent to $208,400 from a year ago and was down 1.4 percent for all of 2007 from 2006, the NAR said.
"I do expect sales to remain soft through the first quarter and possibly the second quarter," said Lawrence Yun, the real estate group's chief economist.
The number of homes for sale at the end of December fell 7.4 percent to 3.91 million. At the current sales pace, that represented 9.6 months' supply, down from 10.1 months in November.
Elevated inventories leave builders with little incentive to break ground on new projects and push down prices on new and existing homes.
