January 27th, 2010 1:00 PM by Lehel S.
Nationwide sales of previously occupied homes plunged 16.7 percent last month, despite the fact that 2009 sales were up for the first time in four years.
The National Association of Realtors attributed much of December's slowdown - the largest monthly drop in 40 years of recordkeeping - to the extension of a federal tax credit that had prompted many buyers to complete sales earlier.
Stephen Cauley, director of research for the Ziman Center for Real Estate at UCLA, agreed.
"Think about what happened when car companies gave you zero-interest financing," he said. "Anyone who would have been buying in the next six months moved that purchase forward. That's something that clearly happened."
The federal incentive created an initial spike in home sales. But it was followed by a slowdown once buyers realized they had more time to look around and still take advantage of a tax credit of up to $8,000 for first-time homebuyers, he said.
"People were not going to buy a house just for the tax credit," Cauley said. "But if they were planning to buy in the near future they said, `Let's get it now.' I have a daughter who did that."
The federal tax credit had been set to expire Nov. 30. But Congress extended the deadline and expanded it with a new $6,500 credit for existing homeowners who move.
Concerns remain that home sales will weaken after March 31, when the Federal Reserve is set to end its program to buy mortgage securities to keep home loan rates low. Once that program ends, mortgage rates could rise.
Some analysts question whether the housing market can remain stable without the hundreds of billions in government spending now propping it up.
Locally however, things are not nearly so dire, according to James Joseph, owner of Century 21 Ambassador and Coldwell Banker Ambassador in Whittier.
"I think this is a national story and it lags us," he said. "In California we've already had our cold shower. You could have written that same headline for us one, two or three years ago. It's like a two-hour movie - they just sat down with their popcorn and we're already an hour into the movie."
Figures released Friday by the California Association of Realtors seem to support Joseph's argument.
Sales of existing single-family homes in Los Angeles County were up 15.7 percent in December compared with the previous month, while California sales showed a monthly gain of 4 percent.
Year over year, Los Angeles County sales were up 4.3 percent in December, while the state posted an annual gain of 1.7 percent, CAR reported.
That news is certainly welcome. But Cauley said some experts fear the nation may be in for a double-dip recession because of the huge decrease in wealth.
"The Federal Reserve looks at the net worth of the economy - all the assets minus the value of the liabilities - and that's down about 17 to 18 percent," he said. "And one of the things that drives foreclosures is unemployment, when people can't make their payments anymore."
Los Angeles County's unemployment rate rose to 12.4 percent in December, up from a revised 12.2 percent in November and well above the year-ago rate of 9.2 percent, according to the state Employment Development Department.
Home prices also have shown increasing stability both locally and statewide.
Last month, L.A. County's median home price was $353,560, down 1.7 percent from November but up 4.9 percent from December of 2008, according to CAR.