Pending U.S. Home Resales Probably Climbed as Market Stabilized
The number of Americans signing contracts to purchase previously owned homes probably rose in April for the fourth time in five months as lower prices attracted buyers, economists said before a report today.
The projected 0.5 percent increase would follow a 3.2 percent gain in March, according to the median estimate of 32 economists surveyed by Bloomberg News.
Foreclosure-driven declines in values may put more houses within reach of first-time buyers, helping to stabilize the market and stemming the biggest drag on economic growth. Still, with mortgage rates no longer dropping and unemployment climbing, the real-estate industry may flounder near recent lows for months before a sustained recovery takes hold.
“The housing market is grinding out a bottom,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. Even so, “despite strong affordability, there’s still no real improvement. Consumers are holding back because they fear they’ll lose their jobs.”
The report from the National Association of Realtors is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a 2 percent drop to a 4 percent gain.
Pending resales are considered a leading indicator because they track contract signings. NAR’s existing-home sales report tallies closings, which typically occur a month or two later. The group, whose pending data goes back to January 2001, started publishing the index in March 2005.
Slump Easing
The agents’ association reported last week that home resales increased 2.9 percent in April, buttressing the case that the industry’s slump, now in its fourth year, will end in 2009. The median price dropped 15 percent from a year earlier, the second-biggest decline on record.
Sales gains have been most pronounced in areas such as California and Florida where foreclosures have surged, indicating the drop in prices is stimulating demand.
The Realtors group’s affordability index, which takes into account home values, household incomes and mortgage rates, reached a record high of 176.9 in January. The index was at 166 cash advance loans.7 in March, and readings greater than 100 indicate a family earning the median income can afford a median-priced home at current borrowing costs.
The market is nearing “equilibrium” as inventory shrinks and homes become more affordable, billionaire property investor Sam Zell said last week in a Bloomberg Television interview.
Builder Shares
“We never would have gotten into the position we’re in today if everybody was focusing on where they wanted to live and what was a good value for living as opposed to what they could buy it and flip it for,” said Zell, chairman of Chicago-based Equity Residential, the largest publicly traded apartment company in the U.S.
Builder shares have rebounded in tandem with other stocks on growing speculation the housing market may be steadying. The Standard & Poor’s Supercomposite Homebuilding Index is up 27 percent over the last three months compared with a 28 percent increase for the S&P 500.
Still, an improving economic outlook has pushed up borrowing costs, raising concern the real-estate industry will not rebound.
The average rate on a 30-year fixed mortgage climbed to 4.91 percent last week, according to figures from Freddie Mac. The rate had reached a record-low 4.78 percent in April.
“Home-purchase activity could wallow at moribund levels,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. The emerging “green shoots” of recovery may be stamped out, “forcing us to yet again downgrade our outlook for the economy,” he wrote in a May 29 note to clients.
Job Losses
A weak job market is another reason economists say any rebound in housing would be slow to develop. The unemployment rate, which reached a 25-year high of 8.9 percent in April, may climb to almost 10 percent by the end of 2009, according to the median forecast of economists surveyed by Bloomberg last month.