January’s existing home sales rate was 4.9 million - its lowest level in 10 years and down 23% from a year ago. However, this has been the theme since September, which could indicate a bottom. Along those same lines, January sprouted 57% more foreclosures than the year before, which is better than December’s 97% increase year-over-year. The bleeding still has not come to a halt, but we can see that it might be stabilizing.

This is based on the following rationale:

1. Home prices have decreased 4.6% in the last year.
2. There is a 10 month inventory of homes for sale.
3. Interest rates are lower - a 30-year conventional loan was at 5.76% compared to 6.22% last January.
4. Many buyers are waiting for the President’s Economic Stimulus Plan to take effect, which will increase limits for FHA loans, and allow Freddie Mac to repurchase jumbo loans.

What all this means: If price declines were to follow sales declines, it would compare to the 24% decline experienced during the Great Depression of 1929. However, this is unlikely to happen since most homeowners will take their homes off the market before losing their arses. Furthermore, mortgage rates are around 6%, only half the rate they were in the 80’s. This allows mortgage holders to refinance, therefore reducing the potential of foreclosure.

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