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Pending Sales of Existing Homes in U.S. Decreased 4.3%

Pending Sales of Existing U.S. Homes Decreased 4.3% in December
Cheaper borrowing costs, improved property values and job gains may combine to drive further gains in housing demand, a source of strength for the expansion. Photographer: Patrick T. Fallon/Bloomberg

Pending U.S. home sales declined in December for the first time since August, showing uneven progress in the housing market.

The index of contracts for the purchase of previously owned homes fell 4.3 percent to 101.7 after a revised 1.6 percent increase, the National Association of Realtors reported today in Washington. The median forecast in a Bloomberg survey projected no change in the gauge. Compared with a year earlier, pending sales before seasonal adjustment climbed 4.9 percent.

Cheaper borrowing costs, improved property values and job gains may combine to drive further gains in housing demand, a source of strength for the expansion. The Realtors group said fewer homes in inventory are holding back sales after the best year for the industry since 2007.

“Our expectation is that the U.S. housing market will deliver more of the same in 2013 -- increased start activity, modest home price appreciation, and continued cleansing of the stock of shadow inventory,” Michael Gapen, a New York-based senior economist at Barclays Plc, said in a research note before the report.

Estimates in the Bloomberg survey of 37 economists ranged from a 5 percent drop to a 5 percent gain after a previously reported 1.7 percent increase.

Another report today showed orders for durable goods rose more than forecast in December, reflecting gains in demand for aircraft, communications equipment and electronics. The 4.6 percent surge last month followed a 0.7 percent gain, according to the Commerce Department in Washington. The median projection in the Bloomberg survey called for a 2 percent advance.

By Region

Three of four regions showed a drop in pending home sales last month, including an 8.2 percent decrease in the West and a 5.4 percent drop in the Northeast. Sales contracts advanced 0.9 percent in the Midwest.

Pending sales are considered a leading indicator because they track purchase contracts in advance of actual transactions, which are tabulated a month or two later. Existing or previously owned homes account for more than 90 percent of the housing market.

Sales of U.S. existing homes unexpectedly dropped in December, restrained by the lowest supply of properties in more than a decade, the Realtors group reported last week. Purchases fell 1 percent to a 4.94 million annual rate last month.

“The supply limitation appears to be the main factor holding back contract signings in the past month,” Lawrence Yun, the Realtors group’s chief economist, said in a statement. Still, “buyer interest remains solid.”

New Homes

New-home sales, logged when contracts are signed, declined 7.3 percent in December to a 369,000 annual pace, following a revised 398,000 rate the previous month that was higher than previously estimated and the strongest since April 2010, the Commerce Department reported last week.

For all of 2012, 5.02 million new and previously owned homes were sold, the most since 5.03 million in 2007.

Borrowing costs have remained affordable for those who qualify for financing. The average rate on a 30-year, fixed-rate mortgage was 3.42 percent last week, according to Freddie Mac. A reading of 3.31 percent in November was the lowest in data going back to 1972.

Low interest rates are driving activity for lenders such as Atlanta-based SunTrust Banks Inc., which saw gains in 2012 bolstered by refinancing applications.

Sales Improving

“We do expect a current favorable mortgage market to remain, certainly for the near-term,” Chief Executive Officer William Rogers said on a Jan. 18 earnings call. “There are a lot more clients that can benefit from refinancing, the purchase market is improving and so is the overall housing market.”

Rising home prices also have helped heal the real-estate market that triggered the last recession. The S&P/Case-Shiller index of property values in 20 cities increased 4.3 percent in the year to October, the biggest 12-month advance since May 2010, according to data released Dec. 26. The group will report November figures tomorrow.

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