Tags: Existing | Home | Sales | Rise | Second-Lowest | Level | Record

Existing-Home Sales Rise From Record Low as Market Stays Dismal

Thursday, 23 September 2010 10:13 AM

Sales of U.S. previously owned homes rose in August rose to the second-lowest level on record, indicating housing remains depressed a year after the economic recovery began.

Purchases of existing houses climbed to a 4.13 million annual pace, in line with the median forecast of economists surveyed by Bloomberg News and second only to July’s 3.84 million rate as the weakest in a decade’s worth of data, the National Association of Realtors said today in Washington.

The jobless rate will average more than 9 percent through 2011, according to economists surveyed by Bloomberg News, and that will undermine confidence and signaling foreclosures will hinder real estate as households struggle to make mortgage payments. A distressed housing market was among reasons the Federal Reserve cited this week when it said it’s willing to take additional steps to spur growth.

“We should have relatively low expectations of what the housing sector should be able to achieve over the next few years,” Zach Pandl, an economist at Nomura Securities International Inc. in New York, said before the report. “You have too many homes and too many mortgages and it’s going to take a long time to work through that overhang.”

Economists forecast sales would rise to a 4.1 million pace, according to the median of 72 projections in a Bloomberg News survey. Estimates ranged from 3.8 million to 5 million.

Jobless Claims

Another report today showed applications for unemployment benefits unexpectedly rose last week, a sign companies remain cautious about hiring as economic growth slows. Initial jobless claims increased by 12,000 to 465,000 in the week ended Sept. 18, according to figures from the Labor Department. The total number of people receiving unemployment insurance declined, while those getting extended payments rose.

The index of leading economic indicators rose 0.3 percent in August, more than forecast, according to figures from the New York-based Conference Board.

Compared with a year earlier, existing home sales were down 17 percent before adjusting for seasonal patterns.

The median price increased 0.8 percent to $178,600 last month from August 2009.

The number of previously owned homes on the market fell 0.6 percent to 3.98 million. At the current sales pace, it would take 11.6 months to sell those houses, compared with 12.5 months in July, which was the highest since at least 1999.

Months’ Supply

Month’s supply would need to drop to 8 to 9 months in order to stabilize home prices, NAR’s Chief Economist Lawrence Yun, told reporters as the figures were being released.

Demand will probably be “soft” again in September and October, Yun said.

Sales last month climbed in all four regions, today’s report showed, led by a 14 percent gain in the West.

A government tax credit of up to $8,000 gave housing a temporary lift late last year and into 2010. Demand plunged in July, the month after buyers were originally required to close deals in order to get the incentive. The deadline has since been extended to the end of this month.

After averaging 9.3 percent in 2009, joblessness this year will average 9.6 percent and 9.2 percent in 2011, according to the median forecast of economists surveyed by Bloomberg this month. The last time unemployment exceeded 9 percent for three consecutive years was from 1939 to 1941.

The lack of jobs is also one reason foreclosures are climbing as households stop making mortgage payments. Home seizures reached a record in August for the third time in five months, RealtyTrac Inc. said Sept. 16.

Obama Plans

The Obama administration has said it plans to announce proposals in the next few weeks for an emergency loan program for the unemployed to avert default, and a government mortgage refinancing effort to lower monthly mortgage payments to avoid foreclosures.

The Fed kept its benchmark interest rate in the range of zero to 0.25 percent this week, where it’s been since December 2008, and said the pace of recovery and job growth have “slowed in recent months.” The central bank said it will “continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed.”

The end of the homebuyer credit, joblessness and sagging confidence prompted a decline in orders at Hovnanian Enterprises Inc., the largest homebuilder in New Jersey said on Sept 1. The company said its net orders dropped 37 percent in the quarter ended July 31 from a year earlier.

“Job creation is the key to a housing recovery, which makes it difficult to predict how improvements in the economy and housing market play out,” Chief Executive Officer Ara Hovnanian said in a statement.

The lack of demand has depressed homebuilding stocks this year. The S&P Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and Lennar Corp., was down 4.5 percent from December 31 through yesterday. The broader S&P 500 was up 1.7 percent.

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Sales of U.S. previously owned homes rose in August rose to the second-lowest level on record, indicating housing remains depressed a year after the economic recovery began.Purchases of existing houses climbed to a 4.13 million annual pace, in line with the median forecast...
Thursday, 23 September 2010 10:13 AM
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