U.S. Economy: Home Resales Rose More Than Forecast in September
By Bob Willis
Oct. 24 (Bloomberg) -- Home resales in the U.S. rose more than forecast in September, aided by foreclosure-driven declines in prices that indicated the market was stabilizing before the latest slump in financial markets.
Purchases of existing homes jumped 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said today in Washington. The median price dropped 9 percent.
Economists said sales figures for this month and next will be critical in determining whether sales have reached a bottom as predicted by the Realtors' group. Federal Reserve Chairman Ben S. Bernanke earlier this month said even households with ``good credit'' were finding it tough to get mortgages.
``This may be a temporary bump as we clear out these foreclosed properties,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``As the meltdown really hits these figures in late October and November, that's when we could see some retracement.''
Resales were forecast to rise to a 4.95 million annual rate from a 4.91 million pace in August, according to the median estimate of 66 economists in a Bloomberg News survey. Projections ranged from 4.7 million to 5.11 million.
Sales rose 1.4 percent compared with a year earlier, the first year-over-year increase since November 2005. Resales totaled 5.65 million in 2007.
Today's figures compare with the 4.86 million level reached in June, the lowest in a decade and 33 percent down from the record reached in September 2005.
Distressed Sales
Foreclosure-related sales accounted for 35 percent to 40 percent of last month's total, the agents' group said. Of those, about 80 percent were for primary residence, higher than the average of about 75 percent and signaling that investors are not a primary reason for the jump, said Lawrence Yun, the group's chief economist.
``In terms of sales, I think we have bottomed out,'' Yun said in a press conference. ``The first step to housing-market stabilization is rising home sales. Hopefully, this trend can continue.''
The number of previously owned unsold homes on the market at the end of September represented 9.9 months' worth at the current sales pace, the fewest since February and down from 10.6 months' at the end of the prior month.
Inventories need to continue dropping in order to stabilize prices, and that will take more time, Yun also said. In the past, the Realtors' group has said a five to six month's supply represents a stable market.
Price Falls
The median price of an existing home dropped from a year ago to $191,600, the lowest since April 2004. Falling home prices make it harder to refinance mortgages, pushing up foreclosures in the third quarter to the highest since record-keeping began in 2005, according to Realtytrac.com.
Resales account for about 90 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
Today's report showed resales of single-family homes climbed 6.2 percent to an annual rate of 4.62 million. Sales of condos and co-ops were unchanged at a 560,000 rate.
Purchases increased in three of four regions, led by a 17 percent surge in the West as distressed sales jumped in California and Nevada. In the Northeast, sales fell 1.2 percent.
Less Equity
Declines in home equity have undermined consumer spending as owners have less cash to tap. A cascade of bank losses and failures has led to the most severe financial crisis in seven decades. Most economists are forecasting a recession in the U.S. and a global slowdown.
As home sales shrank, builders scaled back construction projects by 64 percent through September from a peak in January 2006, the biggest decline since at least 1959. Work began last month on the fewest single-family homes in 26 years, the Commerce Department reported last week. The number of building permits issued also fell, a sign that declines in construction will continue to hurt the economy.
``The housing downswing is really not exactly even nearing a bottom at this point,'' David Seiders, chief economist at the National Association of Homebuilders said Oct. 17 in an interview with Bloomberg Television. ``The core problem in the economy is still housing, and house prices are decimating the financial markets.''
Construction companies continue to struggle. Pulte Homes Inc., the third-largest U.S. builder, this week reported a net loss of $280.4 million for the third quarter, more than double what analysts had projected.
``A bottom in the housing market may not come for some time,'' Chief Executive Officer Richard Dugas said on a conference call yesterday.
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