Existing-Home Sales Dropped 7.4% in December
The U.S. housing market, which helped buoy a sagging economy earlier this winter, took it on the chin in December as home sales tumbled.</br></br>Sales of existing homes fell 7.4% in December to a seasonally adjusted annual rate of 4.87 million units, 5.3% below the 5.14-million-unit pace in December 1999. Most economists had expected sales in the range of five million to 5.1 million units. For the full year, home sales totaled 5.03 million units in 2000. That was down 3.2% from 1999, which was a record year for home sales.</br></br>Economists found the December data troubling, especially when taken with other reports suggesting the market slowed down at year's end. The Commerce Department said last week that while housing starts were up slightly in December, permit applications fell 6.6%. Also, the most recent monthly survey by the National Association of Home Builders found builders are less optimistic about the market than before.</br></br>While all that doesn't add up to a major slowdown, the latest sales data "suggest there is a yellow flag for housing," says David Lereah, the realtors' chief economist. "Not a red flag yet, but a yellow flag." He says the numbers should help assure that the Federal Reserve will lower rates by at least one-quarter of a percentage point when it meets early next week.</br></br>Many economists, however, cautioned against placing too much stock in the December data. For one thing, weather was extremely bad, and even though the data are adjusted for that, the formulas used rely heavily on data from recent years when weather was unseasonably warm.