WASHINGTON – The number of people who bought previously owned homes last year fell to the lowest level in 13 years, and economists say it will be years before the housing market fully recovers.
High unemployment and a record number of foreclosures are deterring potential buyers who fear home prices haven’t reached the bottom. Job growth is expected to pick up this year, but not enough to raise home sales to healthier levels.
“We built too many houses during the boom, and now after the crash, it will take us a long time to get back to normal,” said David Wyss, chief economist at Standard & Poor’s in New York.
The National Association of Realtors reported Thursday that sales dropped 4.8 percent to 4.91 million units in 2010. That was slightly fewer than in 2008, which had been the weakest year since 1997.
The poor year for sales did end on a stronger note. Buyers snapped up homes at a seasonally adjusted annual rate of 5.28 million units in December, the best sales pace since May, and the 12.8 percent rise from November was the biggest one-month surge in 11 years.
In another report Thursday, a private research group’s gauge of future economic activity rose in December, suggesting the economy will strengthen over the next few months.
The Conference Board said Thursday that its index of leading economic indicators rose 1 percent last month after a 1.1 percent increase in November. Those are the biggest increases since March, when the index jumped 1.4 percent.
The biggest positive was a jump in December building permits, which suggests home construction will rise, a boon for the country’s troubled housing market. The National Association of Realtors said Thursday that home sales rose 12.3 percent in December, the fastest pace in seven months.
Also helping support the leading indicators index was a December rally in stock prices, fewer recently laid off people filing for unemployment benefits and slightly improved consumer confidence. A measure of interest rates that historically has predicted faster economic growth and higher inflation also rose.
Gains in mortgage rates may have spurred some fence-sitters to buy homes in December before rates moved higher, analysts noted.
The increase was an encouraging sign after a dismal year for home sales, said Mark Zandi, chief economist at Moody’s Analytics. But he cautioned against raising expectations for a rapid recovery in housing.
“The job market is still very weak, and unemployment is very high. Until we get more jobs, people will be reticent about buying homes,” he said.
Zandi said home prices would fall another 5 percent this year. Sales of previously occupied homes would likely exceed 5 million. That’s a slight improvement from last year, he said, but it will probably take until 2013 or 2014 for sales to reach a healthy level of 6 million units a year.