Sales of Existing U.S. Homes Probably Fell for a Third Month
Sales of existing U.S. homes probably fell in February for a third month, indicating the lack of jobs is hindering government efforts to revive demand, economists said before a report today.
Purchases fell 1.1 percent to a 5 million annual rate, the lowest level in eight months, according to the median forecast of 74 economists surveyed by Bloomberg News. December and January showed the two biggest declines on record.
The extension and expansion of a federal tax credit that helped stabilize housing in 2009 has yet to spark sales this year as hiring hasn’t materialized. Home Depot Inc. is among companies cutting prices to stimulate demand as the world’s largest economy recovers from the worst recession since the 1930s.
“We’re not going to see a significant recovery for some time, though there is a recovery” in housing, said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “We really need to see the job market picking up.”
The National Association of Realtors’ report is due at 10 a.m. in Washington. Survey estimates ranged from 4.75 million to 5.2 million. January sales came in at a 5.05 million pace, a 7.2 percent decline from December, which in turn was down 16 percent from the prior month.
Existing home sales, which account for more than 90 percent of the market, are compiled from contract closings and may reflect purchases agreed upon weeks or months earlier. Many economists consider new home sales, recorded when a contract is signed, a more timely barometer of the market.
The Commerce Department may report tomorrow that new home sales rose last month after slumping in January to the lowest level since records began in 1963.
The Standard & Poor’s homebuilder supercomposite index, which includes companies such as Lennar Corp. and KB Home, has climbed 15 percent this year as earnings improved, thanks in part to a change in tax law allowing builders to carry back losses on land sales for five years. The index has outpaced the broader S&P 500 gauge, which is up 4.6 percent.
The Obama administration in November extended a tax credit for first-time buyers due to expire at the end of that month and expanded it to include to some current owners. The extension covers closings through June as long as contracts are signed by the end of April.
Executives at Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, said they are “keeping a close eye” on demand to gauge if it holds up after the incentive fades.
“We too are interested to see if the positive momentum that we established can be sustained,” Chief Executive Officer Ara K. Hovnanian said on a conference call with investors on March 3.
Other measures aimed at stabilizing housing will end even sooner. The Federal Reserve last week said its program to buy $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt, which was intended to lower borrowing costs, would conclude as planned at the end of this month.
The evidence so far suggests the imminent dissolution of the program, which was credited with helping drive mortgage rates to record lows, isn’t influencing the market. The rate on a 30-year fixed loan was 4.96 percent in the week ended March 18, not far from the 4.71 percent reached on Dec. 3 that marked the lowest in Freddie Mac data going back to 1972.
While borrowing costs are low and prices are down, sustained job gains remain the missing ingredient in promoting a rebound in housing. The unemployment rate, which reached a 26- year high of 10.1 percent in October, is projected to end the year at 9.5 percent, according to the median estimate of economists surveyed by Bloomberg this month.
Home Depot, the largest U.S. home-improvement retailer, plans to cut prices on some plants and patio furniture in March and April to help meet its goal of increasing annual sales for the first time in five years. Executives said unemployment, housing foreclosures and credit restrictions are crimping sales.
“We are looking to continue to drive our traffic in the stores,” Craig Menear, executive vice president of merchandising, said in a telephone interview last week from Atlanta, where Home Depot is based. “Things are still difficult out there for customers.”