Existing home sales down 16.7% in December

According to the National Association of Realtors existing home sales fell 16.7 percent in December brining the annual rate to 5.45 million units. It appears what happened was everyone in the market for a house rushed to buy one in November to take advantage of the government subsidy. The program was then scheduled to expire in November. But after it was extended seven months it looks like people took a breather in December. It should be apparent at this point that housing prices are not sustainable without government intervention.

On a brighter note the median house price was up 1.5% in December at $178,300. It appears our lesson of the crash is yet to be learned. 1.5% annualized is 18%. A number that is unsustainable. Albeit this could just be the markets pulling towards their equilibrium. So in November home sales had peaked for the year and prices rose in December. There are two ways to solve this problem, government regulation or raising interest rates. Should the government intervene with the markets? Or let them run their course?

In March the governments program of buying mortgage backed securities is set to expire. This will be an interesting time to watch what happens.  In December we witness the largest slow down of housing sales since 1968.  One thing we know for sure is that our economy rests on government injection of capital.  The question is how long is this sustainable…