Sales of Existing U.S. Homes at 10-Month High a Sign of Recovery: Economy
Sales of existing homes in the U.S. rose in November to a 10-month high, showing demand may be starting to stabilize following a plunge over the past four years that was steeper than previously calculated.
Purchases climbed 4 percent to a 4.42 million annual pace, the most since January, the National Association of Realtors said today in Washington. The group revised down figures going back to 2007 by an average 14 percent, putting them more in line with other measures of demand.
“Perhaps signs of life are increasing for the housing market,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York, who forecast a sales rate of 4.4 million for last month. “Housing is finally not going to be a drag on economic growth in 2012. That’s not to say that risks don’t abound. We know that there’s a substantial shadow inventory of distressed properties that we’re still waiting to come onto the market.”
Housing, which helped trigger the 18-month recession that began in December 2007 as subprime borrowers defaulted, may be steadying as builder confidence improves and construction picks up. The NAR revisions also reduced the number of unsold houses on the market, pushing inventory last month to the lowest level in six years and indicating there may be less pressure on property values in coming years even as more foreclosures loom.
Stocks fell, following yesterday’s rally, as Oracle Corp. tumbled on disappointing earnings and optimism faded about the European Central Bank’s plan to lend euro-area banks a record amount for three years. The Standard & Poor’s 500 Index dropped 0.3 percent to 1,237.55 at 2:12 p.m. in New York.
The Italian economy contracted in the third quarter, signaling the country may have entered its fifth recession since 2001 as the government adopts new austerity measures that will further weigh on growth. Gross domestic product declined 0.2 percent from the second quarter, when it expanded 0.3 percent, national statistics institute Istat said in Rome today. It was the first contraction since the final three months of 2009.
Japan’s exports fell and the central bank lowered its assessment of the economy for a second straight month as weakening demand in Europe and Asia weigh on the outlook for global growth. Shipments dropped a more-than-expected 4.5 percent in November from a year earlier, a Ministry of Finance report showed today in Tokyo.
The median estimate of 71 economists surveyed by Bloomberg News called for a 5.05 million pace in November existing home sales. Forecasts ranged from 4.38 million to 5.25 million, a wider-than-usual range because some took into account assumptions for the benchmark revisions and others didn’t. October’s reading was revised down to a 4.25 million rate from a previous estimate of 4.97 million, reflecting the NAR’s benchmark updates.
Total purchases were revised to 4.19 million for 2010, down 15 percent from a prior estimate of 4.91 million. Sales were trimmed by 16 percent for 2009, by 16 percent for 2008 and by 11 percent for 2007.
“Before the revisions things were bad, now they are even worse,” Lawrence Yun, the group’s chief economist, said in a news conference today as the figures were released.
Figures from other trackers of home sales showed a slower pace of purchases compared with NAR, prompting the agents’ group to revisit their data. CoreLogic Inc., a real-estate analytics company, released a report in February showing that 3.3 million existing homes were sold in 2010, less than the 4.91 million initially tallied by NAR.
CoreLogic, based in Santa Ana, California, monitors sales figures through property records at local courthouses, while NAR follows sales through the multiple-listing services used by real-estate agents. The property-deed records contain “huge statistical noise,” said Yun, making CoreLogic’s numbers too low.
NAR tallies in recent years were overstated because the consolidation of multiple listing services caused distortions in the data, according to Yun. He said overestimates of direct sales by owners and home builders’ use of the listing services to sell new homes also helped inflate the data.
There were comparable downward revisions to inventory, and median prices were little changed from prior estimates, the report showed. That suggests the decline in property values from the 2006 peak has done less to spur demand, said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York.
“The big take-away is that there was an even bigger gap between affordability and housing demand, making it even more difficult to trigger the rebound,” Meyer said in an interview.
Existing-home sales, tabulated when a contract closes, rose 11 percent from the same month last year before adjusting for seasonal variations. Annual sales peaked at 7.08 million in 2005 during the housing boom.
The number of previously owned homes on the market dropped to 2.58 million in November, the fewest since May 2005, from 2.74 million the prior month, today’s report showed.
At the current sales pace, it would take 7 months to sell those houses, a two-year low and down from 7.7 months at the end of October. A range of seven months to eight months supply is normally consistent with stable home prices, NAR’s Yun said, adding that he thought property values will probably climb in “single digits” next year.
“The overhang of inventories in the housing market is clearing more quickly than previously thought, and that could lead to a firming up of home prices,” said Nomura’s Zentner.
Purchases climbed in all four regions last month, led by a 9.8 percent gain in the Northeast.
Sales of existing single-family homes increased 4.5 percent to an annual rate of 3.95 million. Purchases of multifamily properties, including condominiums and townhouses, were little changed at a 470,000 pace.
The median price of a previously owned home decreased 3.5 percent to $164,200 from $170,200 in November 2010, today’s report showed.
The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.
Federal Reserve policy makers reiterated at a meeting this month that they will keep the benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.
Some homebuilders said they see signs of optimism in the housing market.
“November is a time that historically sales slow down,” Larry Sorsby, chief financial officer at builder Hovnanian Enterprises Inc. (HOV), said on a Dec. 15 call with analysts. “And this year we’ve not seen as dramatic a slowdown as we have in recent prior years. The market feels a little bit better than we would have expected.”
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