Monday, November 21, 2011

Sales of Existing U.S. Homes Probably Declined for Second Month

From Today's Bloomberg/Business Week

Sales of previously owned homes in the U.S. probably fell in October for a second month as falling property values failed to sway buyers, economists said before a report today.

Purchases decreased 2.2 percent last month to a 4.8 million annual rate, according to the median forecast of 65 economists surveyed by Bloomberg News.

Unemployment hovering around 9 percent, falling appraisals and strict lending rules will probably keep hurting demand even after homes lost 32 percent of their value from the 2006 peak and mortgage rates sank to record lows. The end of a temporary halt on foreclosures stemming from faulty seizures may push more homes on the market and trigger even more price decreases.

“Most people recognize that prices are still coming their way, and there’s no great urgency to go out and buy,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “We’re still in the bottoming out process, so I wouldn’t expect to see big sustained gains any time soon.”

The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ sales estimates ranged from 4.6 million to 5.05 million following September’s 4.91 million pace.

Housing, the industry that induced the recession, is still struggling to stabilize as home prices slump. The median value of an existing house fell 3.5 percent in September from a year earlier to $165,400, according to NAR data. The value plunged from a July 2006 record of $230,300 to a low of $156,100 in February.

More Foreclosures

A growing glut of seized properties threatens to drag prices down further. In the third quarter, U.S. lenders started foreclosures on more homes, the first increase in a year, as bank moratoriums that clogged the pipeline dissipated. There were 3.48 million previously owned homes for sale in September, above levels before the recession began in 2007.

Sliding prices and growing unemployment have discouraged household formation and left some people with loans that prevent them from boosting outlays on other goods and services. With the housing market weighing on growth, Federal Reserve officials have called for more accommodative policy.
Fed Bank of New York President William C. Dudley said last week that if the central bank opted to purchase more bonds to lower interest rates and stimulate the economy, “it might make sense” for much of those to consist of mortgage-backed securities, which would have a “greater direct impact on the housing market.”

More Stable

A few signs point to stabilization in housing. Builders broke ground on more homes than forecast in October and construction permits climbed to the highest level since March 2010, Commerce Department figures showed Nov. 17. The National Association of Home Builders/Well Fargo index of builder confidence rose to 20 in November, the highest level since May 2010. Readings below 50 mean more respondents said conditions were poor.

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