December home sales are down, was this a surprise to anyone?

There are many figures to look at in home sales. One of the most important figures is that surrounding previously occupied homes. New home sales do not give a very accurate look into the economy, or the home buyers market. Think of new car sales; just as new car sales figures neglect used car sales, new home figures are equally exclusive.

WASHINGTON (AP) -- Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.

The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.

The report "places a large question mark over whether the recovery can be sustained when the extended tax credit expires," wrote Paul Dales, U.S. economist with Capital Economics.

Sales are now up 21 percent from the bottom a year ago, but down 25 percent from the peak more than four years ago.

The big question hanging over the housing market this spring is whether a tentative recovery will stumble after the government pulls back support. The Federal Reserve's $1.25 trillion program to push down mortgage rates is scheduled to expire at the end of March -- a month before the newly extended tax credit runs out.

Last year, first-time buyers were the main driver of the housing market, but their presence is on the decline. They accounted for 43 percent of purchases in December, down from about half in November, the Realtors group said.

"There is some sustainable momentum building in the housing market right now," said Lawrence Yun, the group's chief economist. However, he cautioned that the recovery will depend on whether the economy starts adding jobs in the second half of the year.

Many experts project home prices, which started to rise last summer, will fall again over the winter. That's because foreclosures make up a larger proportion of sales during the winter months, when fewer sellers choose to put their homes on the market.

This goes back to what I was talking about last year. Home prices are going to fall so long as there are no buyers. This is the entire reason that the housing bubble popped in the first place! Property is worth nothing until someone buys it.

Now that the government incentives are going away home sales will drop again. For the most part, government home buying initiatives propped up people who otherwise couldn't afford to purchase a home, or move to a larger one. Sort of like Cash For Clunkers. The government incentives will do nothing to create a long-term increase in sales.

As for the experts predicting that home prices will fall again; of course they will. Prices are still too high. There aren't enough buyers to sustain current prices. The prices have to fall, or the property will just sit.

So in essence it comes down to two things. Either home prices fall so people can actually afford them, or the economy will have to do a 180.

With unemployment numbers on the increase and an anti-business environment (thanks to constant government interference in the market) a rebound is a long shot anytime soon.

I wonder why this hasn't been pointed out on CNN?

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