Sales of existing homes unexpectedly plunged in January to their lowest level since June, according to an industry report published Friday. The results were far worse than forecast and suggest the housing recovery will fail without government support.

The National Association of Realtors reported that home resales dropped 7.2 percent last month to a seasonally adjusted annual rate of 5.05 million units, down from the revised rate of 5.44 million in December.

On an annual basis, sales were up 11.4 percent.

On an earlier NAR report, first time home buyers’ share in the market declined in January while more existing homes were bought by investors.

First-time buyers purchased 40 percent of homes in January which was below the December figure of 43 percent. Of the transactions, 17 percent was attributed to investors up from 15 percent in December.

Friday's report also showed the median price of homes sold in January was $164,700 unchanged from a year earlier but down 3 percent from December’s.

The total number of existing homes on the market dropped 0.5 percent in January to 3.27 million units, which represents a 7.8 month supply at the current sales pace. That's up from a 7.2 month supply in December.

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.05 percent with an average 0.7 point for the week ending February 25, 2010, up from last week when it averaged 4.93 percent. Last year at this time, the 30-year FRM averaged 5.07 percent.

The 15-year FRM this week averaged 4.40 percent with an average 0.7 point, up from last week when it averaged 4.33 percent. A year ago at this time, the 15-year FRM averaged 4.68 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.16 percent this week, with an average 0.6 point, up from last week when it averaged 4.12 percent. A year ago, the 5-year ARM averaged 5.06 percent.

The 1-year Treasury-indexed ARM averaged 4.15 percent this week with an average 0.6 point, down from last week when it averaged 4.23 percent. At this time last year, the 1-year ARM averaged 4.81 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“Interest rates for 30-year fixed mortgages followed long-term bond yields higher and rose above 5 percent this week amid a mixed set of economic data reports” said Frank Nothaft, Freddie Mac vice president and chief economist. “For instance, the January producer price index jumped well above the market consensus, but the consumer price index remained subdued and consumer confidence declined to the lowest level since April 2009, according to the Conference Board .

“There were also varying reports as to the current state of the housing market. The S&P/Case-Shiller® national home price index rose for the third consecutive quarter in the fourth quarter, albeit at a slower rate, and the 20-city composite index showed an increase in December 2009 for the seventh month in a row; six metropolitan areas experienced positive year-over-year growth, compared to four in November. New home sales, however, unexpectedly slowed in January to the smallest pace since records began in 1963, and the supply of homes at the current sales rate rose to 9.1 months, the most since May 2009.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Source: FreddieMac; Primary Mortgage Market Survey® (PMMS®); www.freddiemac.com

Sales of new homes plunged to a record low in January, the Commerce Department report showed Wednesday.

New home sales plummeted 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level since the government began keeping records in 1963.

That's a decline 6.1 percent from January 2009.

The big drop was a surprise to many industry analysts who had expected sales would rise about 5 percent over December's pace.

The drop in new home sales is evident in all U.S. regions but in the Midwest, where sales was up 2.1 percent. Sales were down 35 percent in the Northeast, 12 percent in the West and almost 10 percent in the South.

New home sales for all of 2009 dropped by almost 23 percent to 374,000, the worst year on record. The National Association of Home Builders estimates that sales will increase to more than 500,000 sales this year.

At the current sales pace, the inventory of homes for sale would take 9.1 months to sell through up from December’s inventory of 8.1 months. Prior to December, inventory levels had been on the decline since May 2009.

Bad news for the near recovering housing market and nearly a quarter of all mortgage borrowers are underwater, meaning their homes are worth below what they owe on their loans.

First American CoreLogic, a research firm monitoring housing equity, reported Tuesday that 24 percent of homeowners with mortgages are underwater. This translates to 11.3 million homeowners.

That's 23 percent above 10.7 million borrowers as recorder three months earlier.

Nevada got the worst record with 70 percent of all mortgaged homes underwater. That was followed by Arizona with 51 percent, Florida with 48 percent, Michigan 39 percent and California 35 percent.

For many homeowners with negative equity the other term for being underwater can spell disaster especially if they suddenly be in financial need after having been unemployed where they have no equity to draw upon.

But if homeowners with mortgages can afford their monthly bills and are not planning to sell they can always wait for the price to go up.

"Negative equity is a significant drag on both the housing market and on economic growth,"said Mark Fleming, chief economist with First American CoreLogic. "It is driving foreclosures and decreasing mobility for millions of homeowners."

With negative equity remaining to be a big problem, it will be difficult to stop foreclosure s as equity becomes more and more negative, homeowners choose to quit paying rather than pay off their mortgages.

"Since we expect home prices to slightly increase during 2010, negative equity will remain the dominant issue in the housing and mortgage markets for some time to come," said Fleming.

Home prices gain in December as the Standard & Poor’s Case-Shiller home price index rises. This was the seventh straight monthly gain, another sign the U.S. housing market continues to recover.

The S&P's/Case-Shiller 20-city home price index released Tuesday increased 0.3 percent from November to December, to a seasonally adjusted reading of 145.87. The index was down 3 percent compared to December 2008 but up more than 3 percent from its bottom in May. Compared to its May 2006 peak, it is still off 30 percent.

Los Angeles had the largest month over month price gain in December with 1 percent.

Five of 20 cities in the index showed declines. Prices drops were recorded in key markets like Miami, New York and Chicago. Chicago had the biggest month over month price loss by 1.6 percent.

In Las Vegas, prices increased 0.2 percent, the first monthly gain for that city in three years.

"It's about time for Las Vegas to come back," said Shiller, adding, "It's possible that Las Vegas could go through another volatile period."