Contracts to purchase previously owned homes unexpectedly dropped in June for the second time in the last three months, a sign of limited momentum in housing.
The index of pending home resales decreased 1.4 percent to 99.3 after a revised 5.4 percent gain in May that was less than initially reported, figures from the National Association of Realtors showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.3 percent June increase.
Slower job growth that’s holding down confidence and strict lending standards are restraining housing even with cheaper properties and mortgage rates at all-time lows. While acknowledging the improvement in housing, Federal Reserve Chairman Ben S. Bernanke said last week that policy makers are ready to take further action to boost an economy that faces a headwind from Europe’s debt crisis.
“One of the cruel facts of this current backdrop is that few people have really been able to take advantage of these historically low rates -- whether that’s by choice or force,” Tom Porcelli, chief U.S. economist for RBC Capital Markets LLC in New York, said before the report. “You really haven’t seen purchase applications pick up in any meaningful way at this stage.”
Estimates in the Bloomberg survey of 34 economists ranged from a drop of 4 percent to a gain of 4 percent.
Stocks held gains after the report as European Central Bank President Mario Draghi said policy makers will do everything in their power to ensure survival of the euro. The Standard & Poor’s 500 Index rose 1.7 percent to 1,360.77 at 10:11 a.m. in New York.
Another report today showed orders for durable goods climbed more than forecast in June, boosted by demand for military hardware and aircraft. Bookings increased 1.6 percent for a second month, the Commerce Department said.
Orders excluding the volatile transportation category slumped 1.1 percent, the most in five months.
First-time applications for unemployment benefits fell more than forecast last week, extending the period of volatility typically seen in July. Jobless claims dropped 35,000 in the period ended July 21 to 353,000, the Labor Department said.
Pending home sales provide insight into actual contract closings a month or two later. Purchases of existing homes, which made up about 93 percent of the residential real estate market last year, are tabulated when the contract closes.
Today’s figures suggest sales of existing homes will slow. Purchases decreased 5.4 percent to an eight-month low 4.37 million annual rate, the Realtors group said July 19.
Existing-home sales have climbed since reaching a low of 3.39 million at an annual rate in July 2010. In the buildup to the subprime lending collapse and recession, sales reached a peak of 7.25 million in September 2005.
Competition from cheaper distressed properties may have held down existing-home sales. Transactions involving foreclosures and short sales, where a lender agrees to accept less than the balance of the mortgage, accounted for 25 percent of the total last month, matching the May figure.
“We’ve been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers and investors,” Lawrence Yun, the Realtors group’s chief economist, said in a statement. “Any bank-owned properties that have been held back in markets with inventory shortages should be released expeditiously to help meet market demand.”
New dwellings accounted for almost 7 percent of the market last year, down from a high of 15 percent during the boom of the past decade. Sales of new homes dropped 8.4 percent to a 350,000 annual rate in June, a Commerce Department report showed July 25.
Compared with a year earlier, June pending sales of previously owned properties increased 8.4 percent after a 14.7 percent jump in May.
Contract signings decreased in three of the four regions, today’s report showed, including a 7.6 percent slump in the Northeast and a 2 percent decline in the South.
Low borrowing costs are making homes more affordable. The average rate on a 30-year fixed mortgage dropped last week to 3.53 percent, the lowest since Freddie Mac record-keeping began in 1972.
For companies like Sherwin-Williams Co., gains in housing translate to more purchases.
“Housing sales are picking back up and housing volumes are improving, those are all really positive market metrics to sustain growth in this business,” Christopher Connor, chairman and chief executive officer of the Cleveland-based paint manufacturer, said on a July 19 earnings call.