WASHINGTON (AP) - Sales of previously owned homes plunged in January to their lowest level since summer, providing fresh evidence that high unemployment and tight lending standards are outweighing the government's attempts to prop up the market.
The results, the weakest since June, were far worse than forecast and suggest the housing recovery will sputter without government support. The Obama administration has spent billions to keep mortgage rates low and give buyers tax breaks, but both programs are set to end this spring.
"Most of the improvement that we've seen in housing over the past year has been tied to some sort of stimulus program," said Wells Fargo economist Mark Vitner. "Now that we're seeing those programs wind down, we're seeing that housing is quite a bit weaker than many people had thought."
The National Association of Realtors said Friday that home sales fell 7.2 percent to a seasonally adjusted annual rate of 5.05 million from a downwardly revised pace of 5.44 million in December. Economists expected a slight increase to a rate of 5.5 million.
Home sales have been sluggish this winter because the deadline for a tax credit for first-time buyers was extended. It had been set to expire on Nov. 30, causing sales to surge last fall. Then Congress extended the deadline until April 30 and expanded it to existing homeowners who move.
Analysts say the extended credit isn't having much impact so far.
"With a few more months before the next round is scheduled to end, buyers have been taking their time," wrote Joel Naroff, chief economist with Naroff Economic Advisors.
The housing report was another sign that consumers still aren't feeling comfortable making sizable purchases, as jobs remain scarce. Weak consumer spending is a key reason why the economic growth is expected to be feeble this year.
While the 5.9 percent pace of growth the final quarter of 2009 was stronger than initially estimated, roughly two-thirds of that came from a burst of manufacturing, the government said Friday.
"For Main Street, the aftereffects of the Great Recession linger on," said Robert Dye, senior economist at PNC Financial Services Group.
Home sales are still up nearly 12 percent from the bottom, but are down 30 percent from their peak more than four years ago.
Last month, sales declined throughout the country, falling the most - nearly 11 percent - in the Northeast. Sales fell by about 7 percent in the South and Midwest and by more than 5 percent in the West.
The median sales price was $164,700, unchanged from a year earlier and down 3.4 percent from December.
The inventory of unsold homes on the market was down slightly at 3.27 million. That's a 7.8 month supply at the current sales pace, up from a recent low of 6.5 months in November.
The bleak report comes after the government reported Wednesday that sales of newly built homes plunged 11 percent to a record low in January. The report, which measures signed contracts to buy homes rather than completed sales, also came as a surprise to economists.
Another question hanging over the housing market this year is whether interest rates will rise, and by how much. The Federal Reserve's $1.25 trillion program to push down mortgage rates is scheduled to expire on March 31.
After that program runs out, mortgage rates should not spike, but rather rise gradually to about 6 percent over the next year, predicts Cameron Findlay, chief economist at LendingTree.com. That will mean homebuyers may have to reduce their price range, and that trend could put downward pressure on prices.