U.S. Pending Home Sales Probably Fell in March for Second Month

U.S. Pending Home Sales Probably Fell in March for Second Month

May 7 (Bloomberg) -- Fewer Americans probably signed contracts to buy previously owned homes in March for the second consecutive month as falling prices and tougher loan rules discouraged buyers, economists said before a report today.

The index of pending home resales fell 1 percent after a 1.9 percent drop in February, according to the median forecast in a Bloomberg News survey of 30 economists. A government report may show worker productivity grew at a 1.5 percent annual rate in the first quarter, the slowest pace in a year.

The glut of unsold properties is driving down home values, while rising defaults on subprime mortgages have prompted lenders to restrict access to credit, representing more hurdles for buyers. The slump in residential real estate may persist for much of the year, hurting economic growth.

``The housing market continues to remain frozen,'' said Maxwell Clarke, chief U.S. economist at IDEAGlobal Inc. in New York. ``People are not quite willing to test the water.''

The National Association of Realtors will release the figures on signed purchase agreements, or pending home sales, at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 4 percent to an increase of 1 percent.

The productivity report, due from the Labor Department at 8:30 a.m., may also show employee costs rose last quarter at the same pace as in the previous three months. Companies are trying to trim expenses as fuel prices jump and sales slow.

The Realtors' data on pending sales go back to January 2001, and the group started publishing the index in March of 2005.

Slump Worsening

Recent reports indicate the worst housing slump in a quarter century is far from abating. Purchases of new homes plunged in March to the lowest level in almost 17 years, while the median price fell the most in almost four decades, according to the Commerce Department.

Sales of previously owned homes fell in March for the seventh time in eight months, according to the Realtors' group.

The pending resales index is considered a leading indicator because it tracks contract signings. The existing-home sales report reflects closings, which typically occur a month or two later.

The pending-sales index is based on a sample of 20 percent of transactions in the multiple listing service used by real estate agents, while the existing-home sales report covers about 40 percent.

Buyers are probably being put off by falling prices. Home values fell 7.7 percent in the first quarter to the lowest level in almost three years, according to Zillow.com, an online real estate data provider. Zillow also estimates that almost 52 percent of owners who bought homes in 2006 now owe more on their property than it is worth.

Less Lending

Access to credit is also shrinking. The share of banks making it tougher for companies and consumers to borrow approached a record in the past three months, according to the Federal Reserve's quarterly survey of senior loan officers issued this week.

D.R. Horton Inc. yesterday reported a record loss as orders slumped and it was forced to write down $834.1 million of land and inventory. The company cut its quarterly dividend by half.

``Conditions in the homebuilding industry remain challenging,'' Chairman Donald Horton said in a statement.

The fallout from the housing downturn is spreading. The world's biggest banks and securities firms cut a combined 65,000 jobs in the past 10 months as mortgage losses and writedowns for financial institutions reached $319 billion, according to Bloomberg calculations.

BLOOMBERG