US existing home sales plunged 16.7 percent during the month of December according to the National Association of Realtors - the sharpest drop in over 40 years - which dragged the annual rate down to a 4-month low of 5.45 million from 6.54 million.
A breakdown of the report shows that inventories rose to 7.2 months from 6.5 months as median prices jumped to $178,300 from $170,000 in November. Furthermore, median prices are now up 1.5 percent from a year ago, marking the first year-over-year increase since August 2007, which suggests that the government's tax incentives for homebuyers has helped to stabilize prices.
However, with demand now lower and supplies rising, sellers may be forced to bring down their prices once again, especially since unemployment rates are still in the double-digits.
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