Existing home sales are due to be reported today and analysts expect a serious drop in sales.  The WSJ launched a preemptive strike against panic by declaring that The housing market isn't as bad as new numbers indicate: [Thanks John!]

The National Association of Realtors is expected to announce an 11.6% drop in December existing-home sales to a seasonally adjusted annual rate of 5.78 million, according to economists polled by Dow Jones.

The large drop is exaggerated by the initial Nov. 30 expiration of the government's first-time home buyer tax credit, which previously boosted sales by some 28% from August through November to an annualized rate of 6.5 million units, the most since early 2007.

The tax credit has been extended through June, but most analysts don't expect sales growth to resume until February or March. In the meantime, further declines in existing-home sales, which make up nearly 90% of the market, are sure to raise concerns about the recovery in housing and the broader economy.

But there are scattered signs of improvement. Home-price declines have slowed; the S&P/Case-Shiller index out Tuesday is expected to show prices in 20 major cities down about 5.4% in November from a year ago, compared with a trough of nearly 20%.

It's interesting that while the WSJ feels that the numbers are "exaggerated" by the drop, back in November, they didn't seem to think that the rise in sales was "exaggerated" by the tax credit when they announced that Existing Home Sales Jump 10.1%: [Although they indicated that the tax credit was a factor.]

 

Home resales leaped in October, rising far more than expected as a fat tax credit offset fears about joblessness.

Sales of existing homes increased by 10.1% to a 6.10 million annual rate from 5.54 million in September, the National Association of Realtors said Monday.

Inventories kept shrinking. Prices fell, but the NAR said the decline was the smallest in more than a year.

The 6.10-million rate was the highest since February 2007. Economists surveyed by Dow Jones Newswires expected a 2.3% increase in sales during October, to a rate of 5.70 million.

"Many buyers have been rushing to beat the deadline for the first-time buyer tax credit," NAR economist Lawrence Yun said.

Aside from the tax credit, low prices and mortgage rates have drawn in buyers, concerned as the U.S. unemployment rate climbed in October to 10.2%.

Along with the cheery news last November, the WSJ included this video interview with noted expert Ken Rosen of the Fisher Center for Real Estate.  Rosen indicated then that the extension of the tax credit was going to have an even bigger effect over the next six months:

Buyers are now going to expect tax credits as long as the market is weak, and the credits are unlikely to have the fire sale effect they did last October.  It's the upside that was exaggerated last October, not the downside that we are experiencing now.

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Update:

Oh look at this.  After expecting a drop of 11.6%, the drop was actually 16.7%- the largest drop on record.  I wonder how the WSJ spins this one?