Sales of existing homes plunged in March
By Courtney Schlisserman and Shobhana Chandra
Bloomberg News
Published April 24, 2007, 10:15 AM CDT
By Courtney Schlisserman and Shobhana Chandra
Bloomberg News
Published April 24, 2007, 10:15 AM CDT
Sales of previously owned homes in the U.S. declined more than forecast in March to the lowest level in almost four years, delaying housing's recovery from a slump that's shown some signs of reaching bottom.
Purchases dropped 8.4 percent last month to an annual rate of 6.12 million, from 6.68 million in February, the National Association of Realtors said today in Washington. Sales fell 11.3 percent compared with a year earlier.
The decline in sales, while partly weather related, may renew concern that the housing recession will linger and put at risk the Federal Reserve's forecast for moderate economic growth. Subprime mortgage defaults are rising, and owners' reluctance to reduce prices may keep more unsold properties on the market.
"I have no reason to believe that this particularly is the low," said Kevin Logan, senior market economist at Dresdner Kleinwort in New York. "A lot of forces that drove sales higher in recent years are still weakening."
Concern about mortgage defaults helped depress consumer confidence in the U.S. to the lowest level in eight months during April, a separate private report showed.
The Conference Board's index of consumer confidence fell to 104.0 this month from 108.2 in March, the New York-based group reported today. The index averaged 105.9 last year.
Home resales were forecast to drop 4.3 percent last month to a 6.40 million annual rate, from February's originally reported 6.69 million, according to the median estimate in a Bloomberg News survey of 66 economists. Estimates ranged from 6.2 million to 6.75 million.
March's sales rate was the lowest since June 2003, and the monthly decline was the biggest drop since January 1989, according to David Lereah, the Realtors' chief economist.
"The negative impact of subprime is considerable," Lereah said at a briefing. "We expect sales to be sluggish in the second quarter."
Last year, 6.48 million previously-owned homes were sold, the third-highest on record.
The supply of homes for sale decreased 1.6 percent to 3.745 million last month. At the current sales rate, that represents a 7.3 months' supply, the highest since October, compared with 6.8 months' worth at the end of February.
The median price of an existing home fell 0.3 percent last month from a year ago to $217,000.
Another industry report earlier today showed a measure of home values in 20 metropolitan areas, the S&P/Case-Shiller home- price index, declined 1 percent in February from a year earlier, the biggest price drop since the index started in 2001.
Resales of single-family homes fell 9.5 percent in March to an annual rate of 5.32 million, the Realtors' report said. Sales of condos and co-ops were unchanged at an 800,000 rate.
Purchases fell 10.9 percent in the Midwest, 9.1 percent in the West, 8.2 percent in the Northeast and 6.2 percent in the South.
Monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier. Unusually warm weather at the end of 2006 helped bring out more house hunters than usual, contributing to a jump in resales in the first two months of 2007. After a January gain, existing home sales rose in February by the most in three years.
March resales were probably pushed lower because "the weather was particularly disruptive" the prior month, said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado.
New home sales, a more timely barometer because they are recorded when a contract is signed, may reflect improved weather last month. A Commerce Department report tomorrow may show new home sales rose to an annual rate of 890,000 in March from 848,000 in the prior month, according to the median forecast in a Bloomberg survey. Sales of existing homes account for about 85 percent of the U.S. housing market, and new home sales make up the rest.
Defaults by subprime borrowers, or consumers with poor or limited credit histories, will limit sales this year and put more homes back on the market, economists said.
Foreclosures surged 47 percent last month from a year ago, RealtyTrac Inc. reported last week. The failure or sale of 50 subprime mortgage companies has tightened the supply of money for lending.
Fed policy makers, who forecast the economy will expand at a moderate rate as the drag from home-construction diminishes, expect a limited impact. Subprime spillovers "appear to have been minimal," Fed Governor Frederic Mishkin said last week.
"Most borrowers are not likely to face a serious credit constraint," Mishkin said in a speech at Bard College in Annandale-on-Hudson, New York. "The market could be bottoming out."
Housing starts in March rose for the second consecutive month, Commerce Department data showed. Building permits, a sign of future construction, also increased.
Homebuilders' announcements last week suggested the market remains uneven. NVR Inc., the builder of Ryan Homes, reported that first-quarter profit beat analysts' estimates as orders rose 8 percent. Pulte Homes Inc. said new orders fell 21 percent in the first quarter from a year earlier, and it will report a loss.
D.R. Horton Inc., the second-largest U.S. homebuilder, reported an 85 percent plunge in its fiscal second-quarter profit as sales dropped by more than a quarter and the company had to walk away from options to buy land.
"I don't think the market is stabilizing," Chief Executive Officer Donald Tomnitz said on a conference call. "Clearly our sales are not where we wanted them to be." The housing markets in California, Florida and Arizona "are becoming tougher," he said.
--With reporting from Brian Louis in Chicago.
Purchases dropped 8.4 percent last month to an annual rate of 6.12 million, from 6.68 million in February, the National Association of Realtors said today in Washington. Sales fell 11.3 percent compared with a year earlier.
The decline in sales, while partly weather related, may renew concern that the housing recession will linger and put at risk the Federal Reserve's forecast for moderate economic growth. Subprime mortgage defaults are rising, and owners' reluctance to reduce prices may keep more unsold properties on the market.
"I have no reason to believe that this particularly is the low," said Kevin Logan, senior market economist at Dresdner Kleinwort in New York. "A lot of forces that drove sales higher in recent years are still weakening."
Concern about mortgage defaults helped depress consumer confidence in the U.S. to the lowest level in eight months during April, a separate private report showed.
The Conference Board's index of consumer confidence fell to 104.0 this month from 108.2 in March, the New York-based group reported today. The index averaged 105.9 last year.
Home resales were forecast to drop 4.3 percent last month to a 6.40 million annual rate, from February's originally reported 6.69 million, according to the median estimate in a Bloomberg News survey of 66 economists. Estimates ranged from 6.2 million to 6.75 million.
March's sales rate was the lowest since June 2003, and the monthly decline was the biggest drop since January 1989, according to David Lereah, the Realtors' chief economist.
"The negative impact of subprime is considerable," Lereah said at a briefing. "We expect sales to be sluggish in the second quarter."
Last year, 6.48 million previously-owned homes were sold, the third-highest on record.
The supply of homes for sale decreased 1.6 percent to 3.745 million last month. At the current sales rate, that represents a 7.3 months' supply, the highest since October, compared with 6.8 months' worth at the end of February.
The median price of an existing home fell 0.3 percent last month from a year ago to $217,000.
Another industry report earlier today showed a measure of home values in 20 metropolitan areas, the S&P/Case-Shiller home- price index, declined 1 percent in February from a year earlier, the biggest price drop since the index started in 2001.
Resales of single-family homes fell 9.5 percent in March to an annual rate of 5.32 million, the Realtors' report said. Sales of condos and co-ops were unchanged at an 800,000 rate.
Purchases fell 10.9 percent in the Midwest, 9.1 percent in the West, 8.2 percent in the Northeast and 6.2 percent in the South.
Monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier. Unusually warm weather at the end of 2006 helped bring out more house hunters than usual, contributing to a jump in resales in the first two months of 2007. After a January gain, existing home sales rose in February by the most in three years.
March resales were probably pushed lower because "the weather was particularly disruptive" the prior month, said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado.
New home sales, a more timely barometer because they are recorded when a contract is signed, may reflect improved weather last month. A Commerce Department report tomorrow may show new home sales rose to an annual rate of 890,000 in March from 848,000 in the prior month, according to the median forecast in a Bloomberg survey. Sales of existing homes account for about 85 percent of the U.S. housing market, and new home sales make up the rest.
Defaults by subprime borrowers, or consumers with poor or limited credit histories, will limit sales this year and put more homes back on the market, economists said.
Foreclosures surged 47 percent last month from a year ago, RealtyTrac Inc. reported last week. The failure or sale of 50 subprime mortgage companies has tightened the supply of money for lending.
Fed policy makers, who forecast the economy will expand at a moderate rate as the drag from home-construction diminishes, expect a limited impact. Subprime spillovers "appear to have been minimal," Fed Governor Frederic Mishkin said last week.
"Most borrowers are not likely to face a serious credit constraint," Mishkin said in a speech at Bard College in Annandale-on-Hudson, New York. "The market could be bottoming out."
Housing starts in March rose for the second consecutive month, Commerce Department data showed. Building permits, a sign of future construction, also increased.
Homebuilders' announcements last week suggested the market remains uneven. NVR Inc., the builder of Ryan Homes, reported that first-quarter profit beat analysts' estimates as orders rose 8 percent. Pulte Homes Inc. said new orders fell 21 percent in the first quarter from a year earlier, and it will report a loss.
D.R. Horton Inc., the second-largest U.S. homebuilder, reported an 85 percent plunge in its fiscal second-quarter profit as sales dropped by more than a quarter and the company had to walk away from options to buy land.
"I don't think the market is stabilizing," Chief Executive Officer Donald Tomnitz said on a conference call. "Clearly our sales are not where we wanted them to be." The housing markets in California, Florida and Arizona "are becoming tougher," he said.
--With reporting from Brian Louis in Chicago.
No comments:
Post a Comment