Sales of Existing U.S. Homes Probably Declined in February

Existing Home Sales in U.S. Probably Fell
A "Sold" sign stands outside an existing home in Clayton, North Carolina. Photographer: Jim R. Bounds/Bloomberg

Sales of U.S. previously owned homes probably dropped in February to a three-month low, indicating a sustained housing market recovery has yet to develop, economists said before a report today.

Purchases decreased 4.7 percent last month to a 5.11 million annual rate, according to the median forecast of 60 economists surveyed by Bloomberg News. Sales in January rose to the highest in eight months as investors used all-cash transactions to buy distressed properties.

Foreclosures are adding to the glut of distressed properties and pressuring prices, leaving some Americans with bigger mortgages than their homes are worth as joblessness hovers near 9 percent. The figures underscore the Federal Reserve’s view that the housing market “continues to be depressed” even as the rest of the economy improves.

The labor market is “improving but not rapidly enough to fuel a sharper rebound in the housing sector,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “You’re still seeing prices drifting lower, which is a big problem.” Existing-home sales are being “inflated by the amount of short sales and foreclosure sales going on,” he said.

The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ estimates ranged from 4.8 million to 5.3 million following January’s 5.36 million pace.

Housing, the industry that precipitated the recent recession, is having trouble gaining strength after the government’s homebuyer tax credit expired and caused sales to plunge to a 3.86 million rate in July.

Housing ‘Depressed’

Fed officials, in their statement following their March 15 monetary policy meeting, said that while the “economic recovery is on a firmer footing,” residential real estate is still “depressed.”

“Many potential home buyers are finding mortgages difficult to obtain and are also worried about additional declines in house prices,” Fed Chairman Ben S. Bernanke told lawmakers during March 2 testimony. “There’s no demand for construction to build houses” until more people want homes, he said.

Home prices dropped in the 12 months to December by the most in a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 2.4 percent, the biggest year-over-year decrease since December 2009, the group said Feb. 22.

In addition to an unemployment rate lingering near 9 percent, some underlying home values are less than the mortgages. That indicates foreclosure filings may climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac said earlier this year.

Home Builders

Cheaper homes and distressed properties are making it difficult for homebuilders as well. Housing starts fell in February to the slowest pace since April 2009 and building permits slumped to a record low, Commerce Department figures showed March 16.

Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders has declined 9.7 percent in the 12 months ended March 18, compared with a 9.7 percent increase for the broader S&P 500 Index.

For housing, employment “is the most important part today or biggest impediment,” said Larry T. Nicholson, chief executive officer of Ryland Group Inc., a Calabasas, California-based homebuilder catering to first-time buyers.

Whether potential buyers “have a job and they’re going to keep their job or whether their hopes of employment are out there is still the biggest challenge for us today,” Nicholson said at an investor conference March 8 in Orlando, Florida.

Recent Data

The NAR’s sales tallies in recent years may have been overstated because the consolidation of listing services could have led to data distortions, Lawrence Yun, chief economist at the Realtors’ association, told reporters after last month’s release.

Yun said the agents’ group is hoping to issue its benchmark revisions by the middle of the year. The updates are usually based on census questions relating to homeownership that weren’t included in last year’s decennial population count. He said the group’s figures over the past few years may be showing a slight “upward drift” that will be corrected with the new data.

                Bloomberg Survey

                             Exist    Exist
                             Homes    Homes
                              Mlns     MOM%

Date of Release              03/21    03/21
Observation Period            Feb.     Feb.
Median                        5.11    -4.7%
Average                       5.11    -4.7%
High Forecast                 5.30    -1.1%
Low Forecast                  4.80   -10.5%
Number of Participants          60       60
Previous                      5.36     2.7%
4CAST Ltd.                    5.00    -6.7%
ABN Amro Inc.                 5.20    -3.0%
Action Economics              5.10    -4.9%
Aletti Gestielle SGR          5.30    -1.1%
Ameriprise Financial Inc      5.15    -3.9%
Bank of Tokyo- Mitsubishi     5.30    -1.1%
Bantleon Bank AG              5.05    -5.8%
Barclays Capital              5.20    -3.0%
BMO Capital Markets           5.10    -4.9%
BNP Paribas                   5.00    -6.7%
BofA Merrill Lynch Resear     5.00    -6.7%                  4.80   -10.5%
Capital Economics             5.10    -4.9%
CIBC World Markets            5.20    -3.0%
Citi                          5.10    -4.9%
ClearView Economics           5.20    -3.0%
Commerzbank AG                5.00    -6.7%
Credit Agricole CIB           5.10    -4.9%
Credit Suisse                 5.15    -3.9%
DekaBank                      5.10    -4.9%
Desjardins Group              5.00    -6.7%
Deutsche Bank Securities      5.30    -1.1%
DZ Bank                       5.00    -6.7%
Fact & Opinion Economics      5.25    -2.1%
First Trust Advisors          5.21    -2.8%
HSBC Markets                  5.20    -3.0%
Hugh Johnson Advisors         5.20    -3.0%
IDEAglobal                    5.20    -3.0%
IHS Global Insight            5.00    -6.7%
Informa Global Markets        5.05    -5.8%
ING Financial Markets         5.05    -5.8%
Insight Economics             5.00    -6.7%
Intesa-SanPaulo               5.00    -6.7%
J.P. Morgan Chase             5.15    -3.9%
Janney Montgomery Scott L     5.15    -3.9%
Jefferies & Co.               5.10    -4.9%
Maria Fiorini Ramirez Inc     5.15    -3.9%
MET Capital Advisors          5.22    -2.6%
Moody’s Analytics             5.09    -5.0%
Morgan Stanley & Co.          5.15    -3.9%
National Bank Financial       5.20    -3.0%
Natixis                       5.20    -3.0%
Nomura Securities Intl.       5.23    -2.4%
Parthenon Group               4.96    -7.5%
Pierpont Securities LLC       5.00    -6.7%
PineBridge Investments        4.91    -8.5%
PNC Bank                      5.15    -3.9%
Raymond James                 5.15    -3.9%
RBC Capital Markets           5.00    -6.7%
RBS Securities Inc.           5.20    -3.0%
Scotia Capital                5.15    -4.0%
State Street Global Marke     5.09    -5.0%
Stone & McCarthy Research     5.10    -4.9%
TD Securities                 5.15    -3.9%
Thomson Reuters/IFR           5.15    -3.9%
University of Maryland        4.99    -7.0%
Wells Fargo & Co.             5.00    -6.7%
WestLB AG                     5.12    -4.5%
Westpac Banking Co.           4.93    -8.0%
Wrightson ICAP                5.15    -3.9%
Before it's here, it's on the Bloomberg Terminal. LEARN MORE