Huge Drop in Existing Home Sales No Reason to Panic

The news today is full of headlines screaming about the steep drop in sales for existing homes. December saw the "biggest monthly drop in 40 years," according to the Associated Press.

But no need to panic. Experts knew a big drop was coming in December as sales got back to a sustainable level, following a huge spike in sales the month before in anticipation of the federal home-buyer tax credit expiration.

Existing homes sold at a seasonally adjusted annual rate of 5.45 million in December, according to the National Association of Realtors. That more than a million fewer sales than the annualized rate of 6.54 million in November.

But remember, November was the biggest month for existing home sales in years. Sales surged last fall from September through November as homebuyers hurried to take advantage of the federal home buyer tax credit, which was originally set to expire (but has since been extended). And, compared to the last three years, December's existing home sales rate is not bad at all.