Pending Sales of Existing U.S. Homes Fell 2.6% in November

Pending Sales of Existing U.S. Homes Fell 2.6% in November

Jan. 8 (Bloomberg) -- The number of Americans signing contracts to buy previously owned homes fell more than forecast in November, signaling further deterioration in housing.

The National Association of Realtors' index of pending home sales decreased 2.6 percent to 87.6, following a revised 3.7 percent gain in October that was larger than previously estimated, the group said today in Washington.

More stringent lending practices after the collapse in subprime lending and prospects that home prices will keep falling are deterring buyers, economists said. The housing slump is likely to last well into 2008, hurting economic growth and prompting Federal Reserve policy makers to lower interest rates.

``We're not at the bottom of the housing downturn yet,'' Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts, said before the report. ``Prices are probably going to go down for a while. Until people see things stabilizing, they're going to wait.''

Economists forecast the index of signed contracts for existing homes would fall 0.7 percent following a previously reported 0.6 percent October increase, according to the median of 33 projections in a Bloomberg News survey. Estimates ranged from a drop of 3 percent to a 0.3 percent increase.

Compared with a year earlier, the index was down 19 percent.

Today's report showed pending resales fell in three of four regions. Purchases decreased 13 percent in the Northeast, 4.1 percent in the Midwest and 2.1 percent in the West. Sales rose 2.3 percent in the South.

The bigger gain in October than previously estimated suggested the market may be stabilizing, according to Lawrence Yun, the group's chief economist.

NAR Forecast

``Although there could be some minor slippage in the first quarter, existing home sales should hold in a narrow range before trending up,'' Yun said in a statement. ``The exact timing and the strength of a home-sales recovery is a bit uncertain.''

There was a 10.3 months' supply of previously owned homes on the market in November at the current sales pace, compared with an average 6.5 months in 2006 and 4.5 months a year earlier.

That excess is one reason property values are dropping. Home prices in 20 U.S. metropolitan areas fell in October by the most in at least six years, based on the S&P/Case-Shiller home-price index. The decrease, reported last month, was the biggest since the group started keeping year-over-year records in 2001.

Record foreclosures are adding to the supply of unsold homes and will weigh further on prices this year, economists said.

Cancellations, Delays

Tougher lending rules are adding to market woes. A third of planned home sales were canceled or delayed in September, October and November because of loan problems, according to the results of a survey of 2,416 real-estate agents issued yesterday.

The Realtors association estimates 5.7 million homes will be sold in 2008, little changed from an estimated 5.65 million last year. Purchases of new homes will fall to 669,000 from 773,000.

A report last week showed the labor market weakened in December, fueling concern the real-estate slump is spilling over to the rest of the economy.

The jump in the unemployment rate caused some economists to raise the odds of recession. Harvard University economist Martin Feldstein, member of the group that dates U.S. economic cycles, said the chance of recession had risen to more than 50 percent.

Central bankers said economic growth would probably be ``somewhat more sluggish'' than their previous estimate, according to minutes of the Dec. 11 Federal Open Market Committee meeting released last week. Policy makers cited housing and weaker consumer spending.

``Participants agreed that the housing correction was likely to be both deeper and more prolonged than they had anticipated in October,'' the minutes said.

The real-estate agents' group began reporting pending home resales in March 2005 and has supplied historical data back to February 2001. The gauge is considered a leading indicator because it tracks contract signings. The group's existing-home purchases report tracks closings, which typically occur a month or two later.

BLOOMBERG