KABOOM! Home Sales Crater, Again.

Sale of existing homes dropped 5.3 percent in January, bringing them down to near the lowest levels since 1996. The median home price was down 14.8% from  year earlier, from $199,800 to $170,300. That’s the lowest level since 2003.

Standing inventory of homes on the market fell, which is a bit of good news. But since the annual rate of home sales fell, the months of supply of homes for sale actually went up. In December we had a 9.4 month supply. At the current rate, we have 9.6 months worth of houses. Obviously, the declining prices of existing homes will depress new home construction, as well.

The drop in home sales shows that the decline in the housing market is proving resistant to declining mortgage rates. The average 30-year mortgage rate declined 5.05% in January, a big drop from 5.29% in December. But that drop failed to spark buying.

The failure of January’s lower mortgage rates to stabilize the market for homes could be bad news for policy makes and others hoping that tax credits and government jiggered mortgage rates could stop the decline. The market’s downward trajectory, the new numbers suggests, will not easily be reversed.

A huge factor in pushing down the prices of homes is the number of foreclosed sales. Forty-five percent of the sales in January were from foreclosures.  Without foreclosures, of course, the housing market would be far less liquid, with even fewer home sales. But at least we could pretend our homes were still worth more.

Want a bit of hopeful news? Sales didn’t decline in the West, which has been ground zero for so much of the housing crisis. Perhaps that actually is a sign of stability. Sales fell 14.7% in the Northeast, 5.7% in the Midwest, and 5.7% in the South.

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