U.S. November Existing-Home Sales Unexpectedly Rise

U.S. November Existing-Home Sales Unexpectedly Rise

Dec. 31 (Bloomberg) -- Sales of existing homes in the U.S. unexpectedly rose in November to a level that still suggests the housing slump will be a drag on economic growth.

Purchases rose 0.4 percent to an annual rate of 5 million from a 4.98 million pace in October, the National Association of Realtors said in Washington. Sales were down 20 percent from November 2006 and the median home price fell 3.3 percent.

The improvement may be short-lived as higher mortgage costs and stricter lending rules further depress home sales, economists said. Falling home prices and near-record inventories give would- be buyers more reason to sit on the sidelines to await better bargains, pointing to weak sales into the new year.

``There are some mixed signals coming from the housing market and I think overall the trend is toward weaker sales in the next quarter,'' said Julia Coronado, senior economist at Barclays Capital Inc. in New York, who correctly forecast sales.

Home resales were forecast to hold at 4.97 million, unchanged from the prior month's initially reported figure, according to the median forecast of 58 economists surveyed by Bloomberg News. Economists' forecasts ranged from 4.7 million to 5.15 million. October's sales pace was the lowest since records began in 1999.

The median price dropped 3.3 percent to $210,200 compared with November 2006. Home sales were down 31 percent from their July 2005 peak.

Months' Supply

The number of homes for sale at the end of the month fell 3.6 percent to 4.27 million. At the current sales pace, that represented 10.3 months' supply, compared with 10.7 months in October.

''Inventory is still high and further reduction in prices may be required in some areas to induce buyers back into the market,'' said Lawrence Yun, the real-estate agents group's chief economist in a statement.

The inventory of single-family homes represented a 9.9 months' supply, down from 10.4 the prior month. Still-high inventories, combined with the drop in sales of new homes, gives builders little reason to break ground on new projects.

Sales of new homes, which make up about 15 percent of the market, fell 9 percent in November to a 12-year low, the government said Dec. 28. Purchases were down 53 percent from their July 2005 peak. Existing homes make up the remainder of the market.

New-home sales are considered a leading indicator of the market because they are tabulated when a contract is signed. Sales of existing homes reflect contract closings which typically occur a month or two later.

Housing's Influence

Declines in home construction have detracted from growth for the last seven quarters and are likely to keep weighing on the expansion, according to Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York.

``The housing pain looks likely to continue through 2009,'' Harris wrote in a Dec. 20 note to clients. He predicted ``sales and starts to fall through the middle of 2008, gradually rising in 2009.''

Resales of single-family homes rose 0.7 percent to an annual rate of 4.4 million. Sales of condos and co-ops fell 1.6 percent to a 600,000 rate, the lowest since November 2001.

The increase in purchases was led by a 10 percent rebound in the West. Sales declined 3.3 percent in the Northeast and 2 percent in the South. Sales were little changed in the Midwest.

Home prices in 20 metropolitan areas fell 6.1 percent in October from a year earlier, the biggest decline in at least six years, according to the S&P/Case-Shiller home price index issued last week.

Lower Prices

Falling prices leave owners feeling poorer and less likely to borrow against home equity to finance purchases. Consumer spending, which accounts for more than two-thirds of the economy, may grow at a 1.5 percent pace in the fourth quarter, almost half the rate of the previous three months, economists surveyed by Bloomberg forecast.

The odds of a recession in the next 12 months rose to 39 percent in December from 33.6 percent the prior month, according to the median forecast of economists surveyed by Blue Chip Economic Indicators.

Sellers are cutting prices and builders are scaling back projects to trim a glut of inventories of unsold homes.

``Once we are through absorbing the excess inventory, the supply that's in the marketplace, we will go back to doing good business,'' Robert Toll, chief executive officer of Toll Brothers Inc., the largest luxury-home builder, said on a conference call earlier this month. ``This downturn may be our toughest yet,'' said Toll.

BLOOMBERG