Yesterday, we noted that typical bottoming behavior was occurring in the housing market as existing home sales rose from the month before as banks blew out foreclosed properties at fire-sale prices.

However, that does not mean the bottom is in.  Rather, it is the beginning of the bottoming process.  The actual bottom is probably several months away.

Evidence that home prices will remain under pressure over the neat term was today's news that new home sales in December were the lowest on record.

Purchases dropped to an annual pace of 331,000, lower than all 70 forecasts in a Bloomberg News survey, Commerce Department figures showed in Washington. Other reports today said orders for durable goods slumped for a fifth month and a record number of Americans were collecting jobless benefits.

The collapse in demand for homes means builders are still constructing a surplus of properties, and signals more pressure on prices. The intensifying crisis will make it harder for President Barack Obama to arrest the industry’s decline with proposed tax breaks and steps to slow mortgage foreclosures.

“Builders are slashing production, but it’s difficult for them to keep up with sales that are falling so fast,” said Nigel Gault, chief U.S. economist at IHS Global Insight, in Lexington, Massachusetts, who at 345,000 had the lowest estimate of economists surveyed. “New homes are getting cheaper, but you can’t get credit so you can’t buy.” ...

New-home purchases, which now account for less than 10 percent of the market, are a timelier indicator than existing sales because they are based on contract signings. Sales of previously owned homes, which make up the rest, are compiled from closings and reflect contracts signed weeks or months earlier.

Getting ‘Clocked’

“The new-home market is getting disproportionately clocked relative to the existing-home market,” Stephen Stanley, chief economist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut, said before the report. “New home sales have taken the bulk of the hit.”

Sales of existing homes in December unexpectedly rose 6.5 percent, the National Association of Realtors said Jan. 26. For the full year 2008, existing home sales fell 13 percent.