Existing U.S. Home Sales Fall for Third Month (Update1)
By Shobhana Chandra
March 23 (Bloomberg) -- Sales of existing U.S. homes fell in February for a third month, indicating a lack of jobs is hindering government efforts to revive demand.
Purchases dropped 0.6 percent to a 5.02 million annual rate, the lowest level in eight months and in line with the median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. The median price decreased 1.8 percent from February 2009.
The extension and expansion of a federal tax credit that helped stabilize housing in 2009 has yet to spark sales this year as hiring hasn’t materialized. Home Depot Inc. is among companies cutting prices to stimulate demand as the world’s largest economy recovers from the worst recession since the 1930s.
“It’s going to be a very slow recovery for housing,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “People don’t want to commit to a home purchase if they’re worried about their job.”
Stocks climbed after the report and Treasury securities dropped. The Standard & Poor’s 500 Index rose 0.2 percent to 1,167.65 at 10:10 a.m. in New York.
Economists’ Forecasts
Existing home sales were forecast to fall to a 5 million annual rate, according to the median estimate of 74 economists in a Bloomberg News survey. Projections ranged from 4.75 million to 5.2 million, after an initially reported 5.05 million rate in January.
Purchases of existing homes climbed 7.9 percent compared with a year earlier prior to adjusting for seasonal patterns. The median price decreased to $165,100 from $168,200 a year ago.
The number of previously-owned homes on the market jumped 9.5 percent to 3.59 million. At the current sales pace, it would take 8.6 months to sell those houses compared with 7.8 months at the end of the prior month.
The increase is supply last month was “unusual,” Lawrence Yun, the Realtors’ chief economist, said in a news conference today. The jump may be caused by more distressed properties coming on the market and by trade-up buyers who are now putting their houses up for sale in advance of other purchases, he said.
The share of homes sold to first-time buyers increased to 42 percent, from 40 percent in January, said Yun.
Sales Breakdown
The report showed sales of existing single-family homes decreased 1.4 percent to an annual rate of 4.37 million. Sales of condos and co-ops increased 4.8 percent to a 650,000 rate.
Purchases dropped in two of four regions, led by a 4.7 percent decline in the West. A lack of inventory in the California market is restraining purchases in the West, Yun said. Sales fell 1.1 percent in the South, rose 2.4 percent in the Northeast and climbed 2.8 percent in the Midwest.
Existing home sales, which account for more than 90 percent of the market, are compiled from contract closings and may reflect purchases agreed upon weeks or months earlier. Many economists consider new home sales, recorded when a contract is signed, a more timely barometer of the market.
The Commerce Department may report tomorrow that new home sales rose last month after slumping in January to the lowest level since records began in 1963.
Credit Extended
The Obama administration in November extended a tax credit for first-time buyers due to expire at the end of that month and expanded it to include to some current owners. The extension covers closings through June as long as contracts are signed by the end of April.
Executives at Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, said they are “keeping a close eye” on demand to gauge if it holds up after the incentive fades.
“We too are interested to see if the positive momentum that we established can be sustained,” Chief Executive Officer Ara K. Hovnanian said on a conference call with investors on March 3.
Other measures aimed at stabilizing housing will end even sooner. The Federal Reserve last week said its program to buy $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt, which was intended to lower borrowing costs, would conclude as planned at the end of this month.
Mortgage Rates
The evidence so far suggests the imminent dissolution of the program, which was credited with helping drive mortgage rates to record lows, isn’t influencing the market. The rate on a 30-year fixed loan was 4.96 percent in the week ended March 18, not far from the 4.71 percent reached on Dec. 3 that marked the lowest in Freddie Mac data going back to 1972.
While borrowing costs are low and prices are down, sustained job gains remain the missing ingredient in promoting a rebound in housing. The unemployment rate, which reached a 26- year high of 10.1 percent in October, is projected to end the year at 9.5 percent, according to the median estimate of economists surveyed by Bloomberg this month.
Home Depot, the largest U.S. home-improvement retailer, plans to cut prices on some plants and patio furniture in March and April to help meet its goal of increasing annual sales for the first time in five years. Executives said unemployment, housing foreclosures and credit restrictions are crimping sales.
“We are looking to continue to drive our traffic in the stores,” Craig Menear, executive vice president of merchandising, said in a telephone interview last week from Atlanta, where Home Depot is based. “Things are still difficult out there for customers.”
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Last Updated: March 23, 2010 10:13 EDT
_______________________________________________________
If you take anything I say as advice, you're crazier than I am.
