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Pending U.S. Home Sales Decline in Sign Tax Credit Failing to Lure Buyers

by on March 4, 2010

By Courtney Schlisserman March 4 (Bloomberg) — The number of contracts to buy previously owned U.S. homes unexpectedly declined in January, showing the extension of a tax credit is sparking little interest. The index of purchase agreements, or pending home sales, fell 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors announced in Washington. In November, the measure slumped a record 13.7 percent. Snowstorms in February probably limited contract signings and sales that month as well, the group said. The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping boost sales last year. A lack of jobs and mounting foreclosures have depressed confidence, indicating housing will take time to rebound. The original deadline for the credit “clearly pulled demand forward and there has been a substantial payback,” said Mark Vitner , a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The housing recovery is going to be very, very slow.” Stocks fell after the report and separate figures that showed a pause in demand for business equipment. Factory orders rose 1.7 percent in January, boosted by a surge in commercial aircraft bookings, according to Commerce Department data that also showed less demand for computers and machinery. The Standard & Poor’s 500 Index declined 0.1 percent to 1,117.72 at 10:38 a.m. in New York. The yield on the 10-year Treasury note decreased two basis points to 3.6 percent. A basis point is 0.01 percentage point. Economists’ Forecasts Economists forecast the gauge would increase 1 percent in January after a previously reported 1 percent gain in December, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from a drop of 4.2 percent to an increase of 4 percent. “The abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February,” Lawrence Yun , the group’s chief economist, said in a statement. “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June.” Other reports earlier today showed initial jobless claims fell from a three-month high, while productivity increased in the fourth quarter. First-time claims for unemployment insurance dropped 29,000 last week to 469,000, the Labor Department said. Productivity Surge Productivity , a measure of employee output per hour, rose at a 6.9 percent annual rate in the final three months of last year, the Labor Department also said. Labor costs dropped 5.9 percent, more than anticipated. The Realtors’ report showed declines in pending sales in all four regions, led by a 13 percent slump in the West. Contract signings fell 8.9 percent in the Midwest, 8.7 percent in the Northeast and 2.1 percent in the South. Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The pending sales data go back to January 2001, and the group began publishing the index in March 2005. Reports last week showed the housing market may be faltering. Sales of previously owned homes unexpectedly dropped 7.2 percent in January after a record decline a month earlier, according to Realtors group’s report Feb. 26. New-home sales slumped to an all-time low, the Commerce Department said Feb. 24. Credit Extension President Barack Obama and Congress extended the first-time buyer credit in early November to cover deals signed by April 30 and closed by June 30, and expanded it to include some current homeowners. Even so, some economists said the original measure pulled sales forward, restraining demand in subsequent months. Among other concerns for the housing outlook, the Federal Reserve said it plans to end later this month a program to purchase mortgage-backed securities, which helped contain borrowing costs. The plan helped push the rate on a 30-year fixed mortgage down to 4.71 percent in early December, the lowest level since Freddie Mac started keeping weekly records in 1972. The rate has hovered around 5 percent since then. Foreclosures pose another threat. Foreclosure filings rose 15 percent in January compared with a year earlier and exceeded 300,000 for the 11th straight month, RealtyTrac Inc. said Feb. 11. 1980s and 1990s The housing market will “follow a similar pattern” to recovery as it did in the late 1980s and early 1990s, which both took “several years,” Toll Brothers Inc. Chief Executive Officer Robert Toll said in a statement Feb. 24. The company, the largest U.S. luxury-home builder, said its orders almost doubled in the first quarter compared with a year earlier. It projected it will sell between 2,100 and 2,750 homes in fiscal 2010 at an average price of $540,000 to $560,000 each. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Pending U.S. Home Sales Decline in Sign Tax Credit Failing to Lure Buyers

Pending Sales of Existing U.S. Homes Increase 1% Following Record Decline

by on February 2, 2010

By Carlos Torres Feb. 2 (Bloomberg) — The number of contracts to buy previously owned U.S. homes was little changed in December after a record plunge, indicating a renewed tax credit will take time to revive sales. The index of purchase agreements, or pending home sales, rose 1 percent after a 16 percent drop in November that was the largest since records began in 2001, the National Association of Realtors announced in Washington. Compared with a year earlier, pending sales rose 11 percent. Demand jumped last year as first-time buyers rushed to qualify for an $8,000 government incentive due to expire Nov. 30. The subsequent renewal and expansion of the initiative may help underpin sales, cushioning the damage from mounting foreclosures and a possible increase in mortgage rates as Federal Reserve policy makers withdraw from the market. “We’ve had a lot of volatility because of the tax incentive,” said David Sloan , a senior economist at 4Cast Inc., a New York forecasting firm, who correctly projected the increase. “We’re in a moderately improving underlying trend. There is some pent-up demand for housing from very weak levels. Housing will be a source of support for the economy in the coming year. Things will slowly get better.” The gain in December matched the median forecast of 35 economists in a Bloomberg News survey. Estimates ranged from a drop of 3.2 percent to a 6 percent increase. Builder Shares Builder shares rose after D.R. Horton Inc. , the second- largest U.S. homebuilder by revenue, reported its first quarterly profit since 2007 as sales rose and the company booked a tax benefit. The Standard & Poor’s Supercomposite Homebuilder Index climbed 4.9 percent at 10:15 a.m. in New York. The broader S&P 500 rose 0.3 percent to 1,092.9. The Realtors group’s pending sales data go back to January 2001, and it started publishing the index in March 2005. Three of the four regions showed increases in pending sales, led by a 5.2 percent gain in the Midwest. Pending sales dropped 3.8 percent in the West. Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The Realtors group started publishing the index in March 2005, and data go back to January 2001. Existing Home Sales Sales of previously owned houses dropped 17 percent in December, almost matching the record decrease in pending purchases the prior month, the agents’ group reported last week. President Barack Obama and Congress extended the first-time buyer credit in early November to cover deals signed by April 30 and closed by June 30, and expanded it to include some current homeowners. Even so, some economists believe the original measure pulled sales forward, restraining demand for a few months. About 2.4 million households will take advantage of the credit this year, according to a projection by Lawrence Yun , the real estate group’s chief economist. Yun anticipates existing home sales will rise to 5.6 million this year from 5.16 million in 2009. Another provision in the legislation allowed builders to use losses incurred in 2008 and 2009 to recoup taxes on profits going back as many as five years, three more years than usual. Lennar Corp. , KB Home and Ryland Group Inc. are among the construction companies that have reported quarterly profits because of the tax refunds. Expanding, Hiring The government initiative may help Lennar, the nations’ third-largest homebuilder by revenue, expand and hire, according to its chief executive officer. “We can start adding communities and frankly adding jobs, which I think was the import of exactly that legislation,” Stuart A. Miller , head of the Miami-based company said after announcing quarterly results on Jan. 7. Homebuilder shares are outperforming the broader stock market so far this year as investors believe the tax benefit may buy the companies enough time to turn a profit later this year as sales improve. The S&P Supercomposite Homebuilder Index climbed 11 percent since Dec. 31 compared with a 1.9 percent decline for the S&P 500. Fed policy makers last week confirmed their program to purchase mortgage-backed securities, which was aimed at keeping borrowing costs low, will expire by March 31 as scheduled. Mortgage Rates The plan helped push the rate on a 30-year fixed mortgage down to 4.71 percent in early December, the lowest level since Freddie Mac started keeping weekly records in 1972. The rate hovered around 5 percent in the last two weeks of January. Joblessness and foreclosures are other concerns. Unemployment is forecast to average 10 percent this year, the highest level in seven decades, according to the median estimate of economists surveyed this month. A record 3 million U.S. homes will be repossessed by lenders this year, RealtyTrac Inc. forecast on Jan. 14. That is up from 2.82 million in 2009, the most since the company began compiling data in 2005. The drop in prices associated with foreclosures represents a double-edged sword for the industry. Decreasing values bring more properties within reach of buyers, while also prevents current owners from trading up. The agents’ group’s affordability index was at 163.8 in December, compared with a record high 178.8 reached in April. A reading of 100 means a family earning the median income can afford the median-priced home at the current mortgage rate. — With assistance from John Gittelsohn in New York. Editor: Vince Golle To contact the reporters on this story: Carlos Torres in Washington ctorres2@bloomberg.net

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Pending Sales of Existing U.S. Homes Increase 1% Following Record Decline

Fed Sees End to Mortgage-Debt Buying; Hoenig Dissents on Low-Rate Policy

January 27, 2010

By Craig Torres Jan. 27 (Bloomberg) — The Federal Reserve kept interest rates near zero and restated its intention to cease buying mortgage-backed securities in March, while losing unanimity on how long to keep borrowing costs low. At the same time, “the Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” the Federal Open Market Committee said in a statement today in Washington. Policy makers are keeping interest rates “exceptionally low” for an “extended period” as they wind down the record amounts of credit they have provided since the bankruptcy of Lehman Brothers Holdings Inc. in 2008. Kansas City Fed President Thomas Hoenig dissented, saying “financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.” Stocks fell in the minutes after the decision was released before recovering. Ten-year Treasury notes declined and the dollar gained. The Fed also repeated that it will close four facilities supporting money markets and bond dealers in February, as well as dollar swap programs with central banks in Europe and Asia. The central bank is “prepared to modify these plans if necessary to support financial stability and economic growth,” the statement said. The Fed also said it is winding down the Term Auction Facility and will hold a final auction on March 8. Return to Growth Chairman Ben S. Bernanke, who tomorrow faces a procedural vote in the Senate on his confirmation for a second term, is looking for signs that the return to economic growth is generating jobs and is accompanied by an increase in credit to people and businesses. The U.S. unemployment rate held at 10 percent in December, while consumer credit dropped a record $17.5 billion in November. “Household spending is expanding at a moderate rate, but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,” the Fed said in its statement. Businesses “remain reluctant to add to payrolls.” Verizon Communications Inc. , coping with subscriber losses at its fixed-line phone business, said yesterday it will cut about 13,000 jobs at the division this year. Home Depot Inc ., the world’s largest home-improvement retailer, also said yesterday it will pare 1,000 U.S. jobs. Consumer Wealth Stocks have provided no increase in consumer wealth this year. The Standard & Poor’s 500 Index is down more than 2 percent, and the Nasdaq Composite Index has lost more than 3 percent. Last year, the indexes rose 23.5 percent and 43.9 percent, respectively. Officials kept their benchmark overnight lending rate between banks in a range of zero to 0.25 percent, where it has been for more than a year. Policy makers said that low rates are contingent on “low rates of resource utilization, subdued inflation trends, and stable inflation expectations .” “Their forecast is for a subdued recovery and the data have been consistent with that,” Julia Coronado, senior economist at BNP Paribas SA in New York, said before the statement. “Retail sales edged lower in December, and credit is still contracting.” Factory Capacity Production in the U.S. rose for a sixth consecutive month in December, and housing markets are stabilizing. Industrial production rose 0.6 percent last month, pushing up factory capacity in use to 72 percent. That’s still below the average plant-use rate of 78.5 percent from 2000 through 2007. “You have sustainable growth, but far below the trend rate” needed to lower unemployment, John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before today’s Fed decision. “I don’t see how the Fed is going to start raising rates with the unemployment rate at 10 percent.” The economy expanded at a 4.6 percent annual rate in the final quarter of last year, according to the median estimate of economists surveyed by Bloomberg News. The government will release its advance report on gross domestic product Jan. 29. Home Sales Sales of existing homes rose 4.9 percent to 5.16 million in 2009, the first gain in four years, the National Association of Realtors said this week. Fed officials will be watching to see if the end of their mortgage bond purchase programs hinders a recovery in housing. The average rate on a 30-year fixed mortgage fell to 4.99 percent the week of Jan. 21 from 5.06 percent the previous week, according to Freddie Mac of McLean, Virginia. The 56-year-old Fed chairman’s first four-year term expires at the end of this month, and the Senate hasn’t yet confirmed the former Princeton University professor for a second four-year term. Bernanke has presided over two years of economic growth that were followed by a financial crisis that produced the worst recession since the Great Depression. The economy contracted at a 5.4 percent annual rate in the fourth quarter of 2008 and at a 6.4 percent rate in the first quarter of 2009. Labor-Market Weakness Employers cut 85,000 jobs in December, after revisions showed a gain of 4,000 in November, the first in almost two years. The unemployment rate held at 10 percent. Wal-Mart Stores Inc., the world’s largest retailer, will eliminate about 11,200 jobs at its Sam’s Club membership warehouse clubs in the U.S. as it hires an outside company to demonstrate products. Dallas-based financial services company Comerica Inc. said Jan. 21 that it plans to cut 300 jobs, or about 3 percent of its total workforce, this year. U.S. central bankers forecast in November a slow decline in unemployment this year with the jobless rate averaging 9.3 percent to 9.7 percent in the fourth quarter, according to their central tendency estimates. “We’ll definitely see job growth in 2010,” New York Federal Reserve Bank President William Dudley told the Nightly Business Report on PBS Television Jan. 13. “Whether it’ll be sufficient to bring down the unemployment rate, materially, remains to be seen.” To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

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New Home Sales in U.S. Unexpectedly Decline, Capping Worst Year on Record

January 27, 2010

By Bob Willis Jan. 27 (Bloomberg) — Sales of new homes in the U.S. unexpectedly dropped in December, capping the worst year on record and signaling the government’s tax-credit extension has yet to shore up demand. Purchases declined 7.6 percent to an annual pace of 342,000, marking the fourth decrease in the past five months, the Commerce Department said today in Washington. For all of 2009 , sales declined 23 percent to 374,000, the lowest level since records began in 1963. The falloff following the expected expiration of an $8,000 incentive for first-time buyers indicates the market remains dependent on government assistance. A setback in housing, combined with a jobless rate projected to average 10 percent this year and record foreclosures that will push up supply, may pressure home prices and builder profits for much of 2010. “It’s going to be a long slog for housing,” said Joshua Shapiro , chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “We will see a decline in home prices and there is still a lot of shadow inventory out there that we need to get through.” Economists anticipate Federal Reserve policy makers, meeting today to discuss the direction of interest rates, will stick to a pledge to phase out programs aimed at keeping mortgage rates low, bringing an end to another form of government help. Mortgage Rates The end of the $1.25 trillion program of mortgage-debt purchases by the central bank on March 31 raises the risk that borrowing costs will jump. The plan helped send the rate on a 30-year fixed loan down to 4.71 percent in early December, the lowest level in Freddie Mac data going back to 1972. The Fed “will probably stop the purchases and see how things go,” said Shapiro. “If rates shoot up, then they will probably be back in the game.” Stocks fell, extending the Standard & Poor’s 500 Index biggest retreat since March. The gauge declined 0.3 percent to 1,088.65 at 12:38 p.m. in New York. The S&P Supercomposite Homebuilder Index rose 0.4 percent. Sales were projected to climb to a 366,000 annual pace from an originally reported 355,000 rate in November, according to the median estimate in a Bloomberg News survey of 70 economists. Forecasts ranged from 340,000 to 399,000. The government revised November’s reading to 370,000. The government tax credit to first-time buyers was originally due to expire on Nov. 30, which probably caused demand to swell in prior months, economists said. The Obama administration and Congress extended the credit to cover closings through June 30, and expanded it to include some current owners. Weather Effect Bad weather may have also played a role in depressing December new-home sales, economists said. Last month was the 14th coldest December and 11th wettest in 115 years of record keeping, according to the National Climatic Data Center, in Asheville, North Carolina. “December was a pretty cold month and that probably hurt shopping for homes,” said Adam York , an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Winter housing data is notoriously volatile.” The median price of a new house decreased 3.6 percent from December 2008, to $221,300, today’s report from the Commerce Department showed. Fed Action At around 2:15 p.m., Fed Chairman Ben S. Bernanke and fellow central bankers may say they will keep the target rate for overnight bank lending near zero to help nurture the recovery. Bernanke is also battling to win support from senators considering his nomination to a second term as Fed leader. Sales of existing homes plunged 17 percent in December, the month after the credit was to end. The decline was the biggest since records began in 1968, the National Association of Realtors said two days ago. For all of 2009, existing home sales rose 4.9 percent to 5.16 million, the first gain in four years. New-home purchases, while accounting for less than 10 percent of the market, are considered a leading indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier. Rising foreclosures and joblessness near a 26-year high will weigh on any housing recovery. A record 3 million U.S. homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make mortgage payments or sell, according to a RealtyTrac Inc. forecast on Jan. 14. That compares with 2.82 million foreclosures last year. Lower prices, while supporting demand, are hurting builders’ earinings. Record foreclosures have depressed the value of the previously owned homes that compete with new houses, prompting construction firms to also lower prices. Lennar Corp. , the third-largest U.S. homebuilder by revenue, reported a 29 percent decline in revenue in the quarter ended Nov. 30 even as profits rose due a tax benefit and cost cuts, the company said Jan. 7. To contact the report on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Home Sales in U.S. Exceed Forecasts as First-Time Buyers Seek Tax Credit

December 22, 2009

By Bob Willis Dec. 22 (Bloomberg) — Sales of existing U.S. homes in November rose to the highest level in almost three years as first-time buyers rushed to take advantage of a government tax credit and lower prices. Purchases increased 7.4 percent to a 6.54 million annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Another report showed the economy grew a less-than-forecast 2.2 percent in the third quarter as companies cut stockpiles, pointing to manufacturing gains at the start of 2010. The housing market is getting a boost from efforts by the government and Federal Reserve to stabilize the industry at the center of the worst recession since the 1930s. Improved consumer spending combined with record decreases in inventories will promote production, which may keep the world’s largest economy growing into 2010. The economy is “rebounding again pretty much across the board,” said Steven Wieting , managing director of economic and market analysis at Citigroup Global Markets Inc. in New York. “We will see somewhat stronger growth,” he said, adding “it’s not going to be one of these dramatic recoveries.” Stocks rose and Treasury securities fell after the reports. The Standard & Poor’s 500 Index added 0.4 percent to 1,118.79 at 1:28 p.m. in New York, and the S&P Homebuilder Supercomposite Index was up 3.8 percent. The yield on the 10-year Treasury note rose to 3.74 percent from 3.68 percent late yesterday. Slower Expansion The economy grew at a 2.2 percent annual rate in the third quarter, down from a prior estimate of 2.8 percent, revised figures from the Commerce Department showed today. Companies curbed spending and cut inventories at an even faster pace, leading to a slower pace of expansion. Existing home sales were projected to rise to a 6.25 million annual rate, according to the median forecast of 69 economists in a Bloomberg News survey. Estimates ranged from 5.2 million to 6.5 million. The NAR revised October’s reading down to a 6.09 million pace from an initially reported 6.1 million rate. First-time buyers accounted for 51 percent of sales last month, and 71 percent of the houses sold cost less than $250,000, the report from the real-estate agents’ group showed. The figures indicate the government’s tax credit helped boost demand. Mortgage Rates Fed debt purchases are helping keep mortgage rates close to record lows, while President Barack Obama’s Nov. 7 extension and expansion of the tax credit through April may provide short-term impetus to sales and construction. The central bank last week signaled it would keep lending rates low for “an extended period” to foster growth. The average rate on a 30-year fixed mortgage was 4.94 percent last week and has averaged 4.85 percent since the end of October, according to Freddie Mac. “Housing is on a solid footing through to the spring markets,” said Derek Holt , an economist at Scotia Capital Inc. in Toronto, who forecast a rise to 6.5 million units. “But once foreclosed, unlisted homes go back on the market and homebuyers’ incentives come off, we’re looking at a weaker back half of next year.” Purchases of existing homes rose 44 percent in November compared with a year earlier, the biggest increase on record. The median price was $172,600, down 4.3 percent from November 2008. The figure is influenced by the mix of sales and the drop reflects the growing proportion of lower-priced houses. Home Prices A report from the Federal Housing Finance Agency in Washington showed home prices fell 1.9 percent in October from a year earlier. The group’s U.S. housing index is down 10.8 percent from the April 2007 peak. The number of previously owned unsold homes on the market fell 1.3 percent to 3.52 million. At the current sales pace, it would take 6.5 months to sell those houses compared with 7 months at the end of October. The ratio is the lowest since December 2006. The share of homes sold as foreclosures or otherwise distressed properties was 33 percent, said Lawrence Yun , the agents group’s chief economist. “The tax credit had the intended impact of drawing buyers in and lowering inventory,” Yun said in a news conference. “An estimated 2 million buyers have taken advantage of the credit.” Single-Family Sales The report showed sales of existing single-family homes rose 8.5 percent to an annual rate of 5.77 million. Sales of condos and co-ops were unchanged at a 770,000 rate. Toll Brothers Inc. , the largest U.S. luxury-home builder, projected deliveries may fall by as much as 33 percent in the 12 months through October 2010, and the average selling price may drop as low as $540,000. “We believe it may take some time for Americans to regain confidence in our economy, their job status and the benefits of home ownership,” Robert Toll, chief executive officer at Toll Brothers, said in a Dec. 3 statement. “We anticipate a gradual recovery in housing, similar to the one that occurred in the early 1990s.” To contact the report on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Homeowners in U.S. Lost $5.9 Trillion Since 2006 as Defaults Cut Values

December 9, 2009

By Dan Levy Dec. 9 (Bloomberg) — U.S. homeowners have lost about $5.9 trillion in value since the housing market’s peak in March 2006 as mounting foreclosures and the recession weighed on prices, according to Zillow.com . Almost half a trillion dollars was wiped out this year through November as housing headed for a third straight annual decline. New foreclosures and higher mortgage rates in 2010 may hinder a rebound, the property data service said today in a statement. “A phenomenal amount of wealth has been erased since the housing bust,” Stan Humphries , chief economist for Seattle- based Zillow, said yesterday in an interview. “For many households, most of their wealth is tied up in real estate.” The net worth of U.S. households at the end of June fell 19 percent from two years earlier to $53.1 trillion, according to Federal Reserve data. Employers have cut more than 7.2 million jobs since the start of the recession in December 2007. Unemployment was 10 percent in November as payrolls declined by 11,000, the Labor Department said last week. LaVonna Gottschall paid $260,000 for her Merced, California, home in September 2007. She put down more than half the price and financed the rest with a 30-year fixed loan. Today, houses in her neighborhood are worth 59 percent less, according to Zillow. “I almost wiped out all my savings,” Gottschall, 64, a retired insurance-company clerical worker, said yesterday in an interview. “I did the right thing. I didn’t get in over my head. Now I’m living month-to-month.” Foreclosure Filings The slowing of property declines because of a government tax credit for first-time buyers and record-low mortgage rates will be tested as more foreclosures reach the market and borrowing costs rise, Humphries said. More than two-thirds of the 154 markets tracked by Zillow have lost value this year. Home foreclosure filings surpassed 300,000 for the eighth straight month in October, according to RealtyTrac Inc. More defaults and job losses “loom over any nascent housing recovery,” James Saccacio , chief executive officer of the Irvine, California-based seller of default data, said Nov. 12. The value of U.S. housing today is about $24.7 trillion, down 19 percent from the market’s peak, according to Zillow. Homes declined $489 billion in the first 11 months of the year. Biggest Drops Merced had the biggest percentage loss in house value from January through November with an estimated 37 percent decline, according to Zillow. Las Vegas was second at 25 percent. The loss was 21 percent in Fort Myers, Florida; 17 percent in Stockton, California; and 16 percent in Orlando, Florida . Values dropped 16 percent in Bakersfield, California, and Anderson, South Carolina, and Phoenix; and 15 percent in Naples, Florida, and Modesto, California, rounding out the 10 biggest declines, Zillow said. Los Angeles had the biggest dollar loss with an estimated $60.8 billion wiped out, Zillow said. Chicago followed with a decrease of $49.6 billion, New York was third at $49 billion, Miami-Fort Lauderdale was fourth at $45.9 billion and Phoenix fifth at $45.1 billion. Boston had the biggest dollar gain, at $23.3 billion, according to Zillow. Increases were estimated at $12.4 billion in Providence, Rhode Island; $10.7 billion in Denver; $7.6 billion in Atlanta; and $4.7 billion in Rochester, New York. Gottschall’s house on a cul-de-sac in Merced has three bedrooms, two bathrooms and a gray-tiled roof. She bought it to be “more comfortable” and now regrets that she didn’t wait another year before purchasing. The median home price in Gottschall’s ZIP code sank to $95,800 in October, the latest Zillow data show. To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net .

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Existing Home Sales in U.S. Rise More Than Forecast, Spurred by Tax Credit

November 23, 2009

By Shobhana Chandra Nov. 23 (Bloomberg) — Sales of existing U.S. homes increased more than forecast in October to the highest level since February 2007, spurred in part by a tax credit that lured first-time buyers. Purchases rose 10.1 percent to a 6.1 million annual rate from a 5.54 million pace in September, the National Association of Realtors said today in Washington. The median sales price decreased 7.1 percent from October 2008, the smallest decline in more than a year. Cheaper homes and stimulus such as the $8,000 incentive, extended and expanded by the Obama administration this month, have revived an ailing housing market that contributed to the worst economic slump since the Great Depression. Further improvement that would aid the economy’s recovery depends on an easing in unemployment and foreclosures. “It’s an impressive increase and shows a lot of pent-up demand for housing,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Buyers have enough confidence to take the plunge. The housing market recovery will be a durable one.” Existing home sales were forecast to rise to a 5.7 million annual rate, according to the median forecast of 66 economists in a Bloomberg News survey. Estimates ranged from 5.2 million to 6 million, after an initially reported 5.57 million rate in September. U.S. stocks extended gains after the report. The Standard & Poor’s 500 Index rose 1.9 percent to 1,111.52 at 10:18 a.m. in New York. Year Earlier Sales had reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. Purchases of existing homes rose 23.5 percent in October compared with a year earlier. The median price fell 7.1 percent from a year ago to $173,100. The number of previously-owned unsold homes on the market fell 3.7 percent to 3.57 million. At the current sales pace, it would take 7 months to sell those houses compared with 8 months at the end of the prior month. The months’ supply is the lowest since February 2007. The share of homes sold as foreclosures or otherwise distressed properties rose to 30 percent from 29 percent in September, NAR chief economist Lawrence Yun said in a press conference today. A “similarly robust” sales gain may occur this month, he said. “With such a sales spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer,” Yun said. Single-Family Gains The report showed sales of existing single-family homes rose 9.7 percent, the biggest gain since 1983, to an annual rate of 5.33 million. Sales of condos and co-ops increased 13.2 percent to a 770,000 rate. Purchases rose 11.6 percent in the Northeast, 14.4 percent in the Midwest, 12.7 percent in the South and 1.6 percent in the West. Sales of previously owned homes, which make up 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. The Commerce Department may report on Nov. 25 that new home sales rebounded to a 405,000 annual percent in October, according to the Bloomberg survey. Tax Credit Home construction seized up last month as builders waited to find out if the first-time homebuyer tax credit would end, a Commerce Department report showed last week. Builders in October broke ground on the fewest houses since April’s record low annual pace. Sales and construction may get another boost after President Barack Obama on Nov. 6 extended the incentive until April 30. Earlier, buyers had to close the transaction by Nov. 30 to be eligible. The government also expanded the program to include some current owners. Borrowing costs may remain low as the Federal Reserve has signaled it’ll keep the benchmark interest rate near zero for an extended period. The average rate on a 30-year fixed mortgage fell last week to 4.83 percent, the lowest since May, according to Freddie Mac. While low rates and government aid are making it easier to buy a home, the labor market remains a risk. The unemployment rate, which rose to a 26-year high of 10.2 percent last month, will stay above 10 percent through the first half of 2010, a Bloomberg survey showed. Foreclosure Filings Foreclosure filings surpassed 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay bills, according to RealtyTrac Inc. data. Some companies see a potential for stronger demand. Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, has signed contracts or options to buy 4,000 land lots in preparation for a market recovery, said Chief Executive Officer Ara K. Hovnanian. The Red Bank, New Jersey-based builder had reduced its land holdings during the recession. “Prices are ridiculously low in some markets,” he said at a conference in New York on Nov. 17. “That’s not going to stay.” To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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