Pending Home Sales Hit New Low
NEW YORK — Pending home sales dropped to a new low in March, an industry group said Wednesday, signaling the housing slump has yet to bottom out even as the spring sell season gets under way.
The National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell to 83.0 from a downwardly revised February reading of 83.8, the index's previous low. The index stood at 103.9 in March 2007.
Wall Street economists polled by Thomson/IFR had predicted the index would slip to a reading of 83.8.
A reading of 100 is equal to the average level of sales activity in 2001, when the index started.
Global Insight economist Patrick Newport said the trifecta of job losses, tight credit conditions and falling home prices is pummeling the housing market and chasing potential buyers to the sidelines to wait out the slump.
"Prices are dropping nearly everywhere at an accelerating rate and buyers don't want to buy an asset that's losing its value," he said.
Newport expects home sales to fall another 10 to 15 percent and bottom out later this year. Home prices will lose another 10 percent before turning around in mid-2009, he predicts.
The NAR takes on a more optimistic outlook and forecasts existing home sales activity and the economy to pick up in the second half of the year as larger home loans backed by the Federal Housing Administration become more widely available. The FHA recently raised the mortgage limits for loans it guarantees.
"Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas," said NAR chief economist Lawrence Yun.
So far, there's been no evidence that the traditionally strong spring selling season is jump-starting any sales activity.
"The fact that the pending home sales index fell again in March reaffirms fears that the housing market correction still has room to run," a report from Moody's Economy.com said.
On Tuesday, Fannie Mae, the country's largest buyer of home loans, reported a $2.2 billion first quarter loss, and its CEO said home prices in the period fell "faster than anyone anticipated." The company forecast a nationwide drop in home prices in 2008 of 7 percent to 9 percent.
Moody's Economy.com also expects the weak numbers in March to lead to further softness in April and May since there's usually a one- to two-month lag between when a buyer signs a home sales contract and the closing of the deal.
NAR expects existing-home sales to edge up to an annual pace of 5.82 million in the fourth quarter from 4.95 million in the first quarter. For the year, the group estimates sales will total 5.39 million and then increase 6.1 percent in 2009 to 5.72 million.
It also expects median price to decline 2.4 percent in 2008 to $213,700 before gaining 4.1 percent to $222,6000 next year.
The March index fell in the South by 0.1 percent, in the West by 1.4 percent and in the Midwest by 10.4 percent. However, the Northeast posted a 12.5 percent gain in March, but remains 15.4 percent below its reading a year ago.
"We're seeing very strong activity right now. We just had an outstanding April, up 2 percent from last year," said Greg Rand, managing partner of Prudential Rand Realty in White Plains, N.Y., which brokers home sales in New York, New Jersey and Connecticut.
Rand also noted that traffic to its Web site and open houses has increased and believes buyers are out there, but are not budging on their price expectations.
"As prices correct, sales will happen," he said.
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J.W. ELPHINSTONE | May 7, 2008 01:47 PM EST |
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