Pending sales of U.S. existing homes unexpectedly declined in September, a sign the housing market will take a long time to mend.
The National Association of Realtors’ index of pending home resales dropped 1.8 percent after a revised 4.4 percent gain the prior month. Compared with the same month a year ago, pending sales were down 25 percent. Moratoriums on foreclosure and stricter lending are limiting progress, the group said.
Purchases have steadied after a 32 percent plunge in the months following the April expiration of a government homebuyer tax credit. Mortgage rates near a record low have failed to stoke demand because foreclosures are depressing prices and unemployment is stuck above 9 percent.
The market “still shows a pretty slow rate of activity,” Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York, said before the report. “The trajectory of the housing market remains very much tied to the labor market.”
Companies may be starting to step up hiring, a report from the Labor Department showed today. Payrolls in October climbed 151,000, exceeding the most optimistic estimate in a Bloomberg News survey of economists. The unemployment rate held at 9.6 percent. The report also showed gains in hours worked and wages.
Treasuries fell and the dollar rose after the reports. The yield on the 10-year Treasury note, which moves inversely to its price, rose to 2.53 percent at 12:47 p.m. in New York from 2.49 percent late yesterday. The dollar strengthened to $1.4062 per euro from $1.4207. The Standard & Poor’s 500 Index increased 0.2 percent to 1,223.11.
Economists forecast pending home sales would increase 3 percent, according to the median of 40 projections in a Bloomberg survey. Estimates ranged from a drop of 1 percent to an increase of 5 percent.
Contract signings fell in three of four regions in September, led by a 5.7 percent drop in the Midwest. There were also declines in the South and Northeast.
“The foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead,” Lawrence Yun, the Realtors group’s chief economist, said in a statement. “Tight credit and appraisals coming in below a negotiated price continue to constrain the market.”
The foreclosure moratoriums at JPMorgan Chase & Co. and other banks threaten to prolong the time it takes for the housing market and prices to fully recover as properties slated for repossession take longer to come to market.
In Arizona, California and Nevada, foreclosure auctions on courthouse steps, known as trustee sales, are down 42 percent since Sept. 20, according to ForeclosureRadar, a real estate tracking service in Discovery Bay, California.
“If what’s a hiatus turns into a moratorium, that’s quite problematic,” Stan Humphries, chief economist for Zillow Inc., a Seattle-based real estate data provider, said in an interview. “It will delay the ultimate bottoming process in the market.”
The labor market is also restraining the housing market. Economists surveyed by Bloomberg News last month forecast the unemployment rate will hold above 9 percent through next year. The last time joblessness exceeded that level for three consecutive years was from 1939 to 1941.
At the same time, financing costs are making it cheaper for homebuyers. The average rate on a 30-year fixed mortgage fell to a record-low 4.19 percent in the week ended Oct. 14, according to Freddie Mac.
The Federal Reserve’s announcement on Nov. 3 that it would purchase another $600 billion in Treasury securities through June may help keep rates low in coming months. Central bankers in a statement said that progress in cutting the unemployment rate and boosting the economy has been “disappointingly slow.”
Pending home sales are considered a leading indicator because they track contract signings. Existing home sales are tabulated when a contract is closed, which typically occurs a month or two later.
Home resales, which account for more than 90 percent of the housing market, rose 10 percent to a 4.53 million rate in September, the Realtors’ group said Oct. 25.
Pulte Group Inc., the largest U.S. homebuilder by revenue, said Nov. 3 orders for the third quarter were down about 12 percent from the same period a year earlier. The company also closed on 3,865 homes in the quarter, down 7 percent.
“Even as low home prices and record low interest rates combined to create unprecedented affordability, potential buyers are hesitant, given weak economic conditions, limited job growth and overall uncertainty about near-term opportunities,” Chief Executive Officer Richard Dugas said on a conference call.
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