Tempering hopes for a steady recovery for housing, a report released Friday indicated that sales were stumbling even with significant government support.
Sales of existing home in January fell 7.2 percent to a seasonally adjusted annual rate of 5.05 million, according to a report by the National Association of Realtors. Analysts had expected an increase of 0.9 percent.
Lawrence Yun, chief economist for the realtors group, called the report “not encouraging” and said in a statement that it “raises concern about the strength of the recovery.”
The surprise decline in home sales was the latest setback for the housing market, which was been propped up in recent months by a government tax credit that offers up to $8,000 to home buyers. The credit helped spur sales in the fall, but since then, demand for homes has weakened as high unemployment and mounting debt have taken a toll on household finances.
Worries that the housing market could slip into another downturn resurfaced this week in the wake of several disappointing reports. Applications for mortgages dropped to the lowest level in 13 years last week. Sales of new homes fell to the lowest level since record-keeping began in 1963. Home prices in major cities increased only slightly in December, according to one barometer, and a broader index showed prices actually falling.
Still, existing home sales remain 11.5 percent higher than in January 2009, offering some hope that the rebound may be intact. Inventories declined 0.5 percent compared with December.
Patrick Newport, an economist for IHS Global Insight, said the market’s struggles suggested the government’s tax credit, after fueling a rush for homes in the fall, was having virtually no effect.
“You have really low interest rates, prices have dropped to the point where there are a lot of good deals out there, but you’re not seeing any pickup in sales,” Mr. Newport said. He cautioned, however, that one month’s data was not sufficient to suggest the housing market was headed for another downturn.
Many forecasts call for sales to pick up as Americans move to close deals before the expiration of the tax credit at the end of April. Economists expect a modest pullback in the summer in the absence of the tax credit, followed by gradual increases toward the end of the year if unemployment eases.
But just how significantly the jobs market will improve this year remains a question, with the unemployment rate still hovering near 10 percent and the economy still shedding jobs.
A separate report on Friday showed that the economy expanded at the end of 2009 at a more vigorous pace than previously thought. But economists remain wary about the prospects for growth as government stimulus fades.
The broadest measure of economic activity, gross domestic product, grew at an annual rate of 5.9 percent in the fourth quarter, slightly higher than the Commerce Department’s original forecast of 5.7 percent. That was the fastest rate in six years, but it came largely because businesses increased spending while also easing the pace of inventory reduction.
Economists do not expect that to continue. Consumer spending, a critical driver of growth, continues to be tepid, underscoring the persistent weakness of the American consumer. In the fourth quarter, spending was originally said to have risen 2 percent, but the revised number was 1.7 percent.
Consumer spending typically helps lead a recovery, but economists do not expect that to happen in this downturn. The jobless rate is predicted to climb slightly to 9.8 percent for February, and a barometer of consumer confidence fell to its lowest level in 10 months this week.
The fourth quarter’s energetic pace was primarily the result of businesses easing the reduction in stockpiles. Inventories fell by $16.9 billion in the quarter, compared with the $33.5 billion originally reported.
The economy also got a lift from more robust business spending, which climbed 6.5 percent, compared with an original forecast of 2.9 percent. Even as they remained hesitant to hire, employers took small steps toward expanding, buying items like software and equipment.
Growth was held back by a greater-than-expected swelling of the trade deficit, as manufacturers and other relied on imported goods to rebuild their businesses. The deficit widened to $40.2 billion in December — its highest level in a year — a 10.4 percent increase from November. Helped by a weak dollar, exports have grown rapidly in recent months, but not fast enough to overcome imports.
Economists expect growth to be muted in the months ahead as businesses reduce their inventories at a quicker pace and government stimulus programs disappear. Some forecasts call for growth this year of 2 to 3 percent.
“There was nothing here to change anyone’s mind about the future,” wrote Joshua Shapiro, chief United States economist for MFR, a research firm. “The most important factors limiting growth will be a less supportive policy stance and households continuing to struggle with ravaged balance sheets and lingering labor market weakness.”
The fourth-quarter data on economic growth will be revised one final time next month.
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