Pending sales of homes fell in September
Posted on Saturday, November 8, 2008
Pending U. S. home sales fell more than expected in September after posting a big jump in August.
The National Association of Realtors said Friday that its seasonally adjusted index of pending sales for existing homes fell 4. 6 percent to a reading of 89. 2. That’s down from an upwardly revised August reading of 93. 5.
Economists surveyed by Thomson Reuters expected a September reading of 90. 6.
The housing slump may extend well into a fourth year as banks turn away borrowers, foreclosures worsen the glut of unsold homes and job losses climb.
Lower property values will keep eroding home equity, causing consumers to retrench further and reinforcing the risk of a deeper recession.
“The outlook has deteriorated,” said David Sloan, a senior economist at 4 Cast Inc. in New York, who estimated a 5 percent drop. “The tightening of credit conditions will push pending home sales lower. We’re in quite a sharp recession, and housing is part of it.”
The index was 1. 6 percent above year-ago levels. It sank to a record low of 83 in March and stood at 87. 8 in September 2007.
The reading should provide a preview of October’s existinghome sales numbers when the Realtors group releases them Nov. 24.
Home sales are considered pending when the seller has accepted an offer, but the deal has not yet closed. Typically there is a one- to two-month lag before a sale is completed.
The U. S. has been coping with the worst housing recession in decades, and many in the real estate and mortgage industries are poring through each month’s data for signs of a bottom.
An index reading of 100 is equal to the average level of sales activity in 2001, when the index started.
National Association of Realtors Chief Economist Lawrence Yun highlighted one positive sign: The pending sales index has been above year-ago levels for two straight months, though prices continue to sink.
Yun noted sales increases in California and Florida, and in Long Island, Boston, Minneapolis, Denver and Washington, D. C. Much of those gains, however, likely are from buyers who are snapping up foreclosed properties at discounted prices.
The Realtors group forecasts U. S. home prices will rise slightly next year to a median of $ 200, 800 after two consecutive years of declines. It forecasts existing-home sales will pick up next year to 5. 3 million after sliding to a projected 5 million this year.
Former Federal Reserve Chairman Alan Greenspan said housing prices are likely to keep declining and are “critical” to determining a bottom to the market.
“We still have got 5 to 10 percentage points to fall” in housing prices, Greenspan said.
Housing-related companies are bracing for prolonged weakness. Illinois Tool Works Inc., the maker of Duo-Fast nail guns and Wilsonart countertops, predicts home construction won’t hit bottom until 2010 because of large inventories and tight lending.
“There are too many issues to be sorted out with both the inventory of existing homes as well as the mortgage market for us to see much change,” Chief Executive Officer David Speer said Thursday. “We’re going to be in a reasonably long period — four to six quarters — before we would see the bottom.” Information for this article was contributed by Alan Zibel of The Associated Press and Shobhana Chandra, Scott Lanman and Sean B. Pasternak of Bloomberg News.
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