Jan. 24 (Bloomberg) — Sales of existing homes in the U.S.
fell more than forecast in December, capping the biggest yearly
slump in more than a generation.
Purchases fell 2.2 percent to an annual rate of 4.89
million, the National Association of Realtors said today in
Washington. For all of last year, sales of single-family homes
declined 13 percent, the most since 1982, and prices dropped for
the first time in at least four decades.
Falling property values and tougher borrowing rules may
lead to more foreclosures and depress housing for most of this
year. The worsening real-estate recession is at the core of the
economic slowdown and will probably prompt the Federal Reserve
to lower interest rates next week and in future meetings,
economists said.
“We are not at the bottom in the housing market, said
Nigel Gault, director of U.S. research at Global Insight Inc., a
Lexington, Massachusetts, forecasting firm. “The Fed is trying
to battle against the fundamentals which say housing is not
going to recover until we have a substantial decline in
prices.
Economists forecast sales would fall to a 4.95 million
annual rate from Novembers previously reported 5 million pace,
according to the median estimate of 71 economists in a Bloomberg
News survey. Projections ranged from 4.75 million to 5.15
million.
Fewer Claims
A separate report today showed fewer Americans filed first-
time claims for unemployment benefits last week. Initial jobless
claims decreased by 1,000 to 301,000, the lowest in four months,
indicating companies are reluctant to fire workers until they
get a better read on the economic slowdown.
The median sales price fell 6 percent to $208,400 from
December 2006 and was down 1.4 percent for all of 2007 from the
previous year.
The median price of a single-family home dropped 1.8
percent in 2007, the first decline since records began four
decades ago and probably the first since the Great Depression in
the 1930s, the Realtors group said.
“I do expect sales to remain soft through the first
quarter and possibly the second quarter, said Lawrence Yun,
the real-estate agents groups chief economist.
The number of homes for sale at the end of December fell
7.4 percent to 3.91 million. At the current sales pace, that
represented 9.6 months supply, compared with 10.1 months in
November. The Realtors group has said a five to six months
supply is needed to stabilize the market.
High Inventories
“With inventories at such high levels, its quite clear
that the housing market is going to be in a decline for a long
period of time, Zach Pandl, an economist at Lehman Brothers
Holdings Inc. in New York, said before the report.
Elevated inventories leave builders with little incentive
to break ground on new projects and push down prices on new and
existing homes.
The Commerce Department is scheduled to report new home
sales next week. Purchases if new houses, which account about 15
percent of the market, fell to a 12-year low in November.
Builders broke ground in December on the fewest houses
since 1991, making last years decline in homebuilding the worst
in almost three decades, the department said Jan. 17.
New home sales are considered a leading indicator of the
market because they are tabulated when a contract is signed.
Sales of existing homes reflect contract closings, which
typically come a month or two later.
Broad Decline
Resales fell in all four regions let by a 4.6 percent
decline in the Northeast.
Sales of single-family homes decreased 2 percent to a 4.31
million pace, according to todays report. Sales of condos and
co-ops dropped 3.3 percent to a 580,000 rate.
The housing slump “may continue to be a drag on growth for
a good part of this year, Fed Chairman Ben S. Bernanke
testified to the House Budget Committee on Jan. 17.
Policy makers this week cut the benchmark overnight lending
rate between banks by three-quarters of a percentage point in
the first emergency action since 2001. Futures markets suggest
the central bank will probably lower the rate again at the next
scheduled meeting on Jan. 29-30.
Mortgage rates are also dropping, making homes more
affordable to those able to get financing. The Realtors groups
affordability index in November and October was at the highest
level in more than two years.
Buyers May Wait
Still, concern that prices will keep falling may continue
to keep many buyers out of the market, economists said.
“Would-be homeowners are not going to jump into the market
to buy new homes no matter how much prices have dropped until
they get a solid feeling that prices have bottomed, Ellen
Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in
New York, said before the report.
Meritage Homes Corp., a builder whose biggest markets are
Texas, Arizona and California, said last week that that fourth-
quarter revenue fell 25 percent because of declining orders. For
all of last year, closings fell 28 percent.
“It is clear that these are extremely difficult times for
all homebuilders, Chief Executive Officer Steven J. Hilton
said in a statement.
To contact the reporter on this story:
Courtney Schlisserman in Washington at
