More Americans unexpectedly signed contracts to buy previously owned homes in October, easing concern that the absence of government support is destabilizing the housing market.
The index of pending home resales jumped a record 10 percent after dropping 1.8 percent in September, the National Association of Realtors said today in Washington. The median forecast in a Bloomberg News survey called for a 1 percent decrease. The group’s data go back to 2001.
Low borrowing costs and reduced prices may attract some buyers, helping housing regain its footing after the end of a tax credit caused demand to slump. Even so, rising foreclosures and unemployment near 10 percent indicate the industry at the center of the last recession will take years to rebound.
“The fundamentals that are driving home sales are low mortgage rates combined with job and income growth and that’s why housing should be expected to grow in coming months,” said Dean Maki, chief economist at Barclays Capital Inc. in New York. “Housing activity will still look low relative to the boom years, but we expect a solid growth rate to occur.”
Stocks added to earlier gains after the report. The Standard & Poor’s 500 Index rose 0.7 percent to 1,214.57 at 10:21 a.m. in New York. Treasury securities fell, pushing the yield on the benchmark 10-year note up to 3 percent from 2.97 percent late yesterday.
Trending Down
Another report today showed fewer Americans filed claims for unemployment insurance payments over the past month, showing the job market is beginning to improve.
The number of applications for jobless benefits averaged 431,000 a week over the month ended Nov. 27, the lowest level since August 2008, Labor Department figures showed. Claims increased by 26,000 last week, more than forecast, to 436,000, after reaching a two-year low.
“Lower lows and lower highs define a downward trend, and that’s what seems finally to be emerging,” Ian Shepherdson, chief U.S. economist at High Frequency Economics LLC in Valhalla, New York, said in a note to clients. “If it continues, we should expect to see better payroll numbers over the next few months.”
A Labor Department report tomorrow may show employers added 145,000 workers last month and the unemployment rate held at 9.6 percent.
Gain Unexpected
The projected decrease in pending home sales was based on the median of 40 forecasts in the Bloomberg survey. Estimates ranged from a drop of 4.8 percent to a gain of 3 percent.
Three of four regions saw an increase, today’s report showed. That included gains of 27 percent in the Midwest, 20 percent in the Northeast and 7.1 percent in the South. Purchases fell 0.4 percent in the West.
“The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011,” Lawrence Yun, NAR’s chief economist, said in a statement. “But activity needs to improve further to reach healthy, sustainable levels.”
Compared with October 2009, pending sales were down 22 percent.
Fed View
Housing is an ongoing concern for Federal Reserve policy makers, who last month announced additional asset purchases to spur growth and reduce unemployment. Their Beige Book report, released yesterday, showed the economy strengthened across much of the U.S. as hiring improved, manufacturing expanded and retailers anticipated a stronger holiday shopping season.
“Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks,” the Fed said in the report, which is based on anecdotal information.
Pending home sales are considered a leading indicator because they track contract signings. Purchases of previously owned homes are tabulated when a contract closes, typically a month or two later.
Sales of existing homes, which now make up about 90 percent of the market, fell more than forecast in October as foreclosure moratoriums and a lack of credit disrupted the market, data from the Realtors group showed last week. In July, sales ran at the weakest pace in records going back a decade.
The tax credit worth as much as $8,000 required contracts be signed on April 30 and closed by Sept. 30. Many of the closings occurred in May and June because the original incentive called for transactions to be completed by June 30.
Companies including Beazer Homes USA Inc., which builds houses for first-time buyers, are cautious about next year.
“Sustained high unemployment levels and the overhang of foreclosures make it very difficult to predict when and to what extent the housing market will recover,” Ian McCarthy, chief executive officer of Atlanta-based Beazer, said on a conference call with analysts on Nov. 5.
This article can be found at: http://www.bloomberg.com/news/2010-12-02/pending-sales-of-existing-homes...
More Americans unexpectedly signed contracts to buy previously owned homes in October, easing concern that the absence of government support is destabilizing the housing market.
The index of pending home resales jumped a record 10 percent after dropping 1.8 percent in September, the National Association of Realtors said today in Washington. The median forecast in a Bloomberg News survey called for a 1 percent decrease. The group’s data go back to 2001.
Low borrowing costs and reduced prices may attract some buyers, helping housing regain its footing after the end of a tax credit caused demand to slump. Even so, rising foreclosures and unemployment near 10 percent indicate the industry at the center of the last recession will take years to rebound.
“The fundamentals that are driving home sales are low mortgage rates combined with job and income growth and that’s why housing should be expected to grow in coming months,” said Dean Maki, chief economist at Barclays Capital Inc. in New York. “Housing activity will still look low relative to the boom years, but we expect a solid growth rate to occur.”
Stocks added to earlier gains after the report. The Standard & Poor’s 500 Index rose 0.7 percent to 1,214.57 at 10:21 a.m. in New York. Treasury securities fell, pushing the yield on the benchmark 10-year note up to 3 percent from 2.97 percent late yesterday.
Trending Down
Another report today showed fewer Americans filed claims for unemployment insurance payments over the past month, showing the job market is beginning to improve.
The number of applications for jobless benefits averaged 431,000 a week over the month ended Nov. 27, the lowest level since August 2008, Labor Department figures showed. Claims increased by 26,000 last week, more than forecast, to 436,000, after reaching a two-year low.
“Lower lows and lower highs define a downward trend, and that’s what seems finally to be emerging,” Ian Shepherdson, chief U.S. economist at High Frequency Economics LLC in Valhalla, New York, said in a note to clients. “If it continues, we should expect to see better payroll numbers over the next few months.”
A Labor Department report tomorrow may show employers added 145,000 workers last month and the unemployment rate held at 9.6 percent.
Gain Unexpected
The projected decrease in pending home sales was based on the median of 40 forecasts in the Bloomberg survey. Estimates ranged from a drop of 4.8 percent to a gain of 3 percent.
Three of four regions saw an increase, today’s report showed. That included gains of 27 percent in the Midwest, 20 percent in the Northeast and 7.1 percent in the South. Purchases fell 0.4 percent in the West.
“The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011,” Lawrence Yun, NAR’s chief economist, said in a statement. “But activity needs to improve further to reach healthy, sustainable levels.”
Compared with October 2009, pending sales were down 22 percent.
Fed View
Housing is an ongoing concern for Federal Reserve policy makers, who last month announced additional asset purchases to spur growth and reduce unemployment. Their Beige Book report, released yesterday, showed the economy strengthened across much of the U.S. as hiring improved, manufacturing expanded and retailers anticipated a stronger holiday shopping season.
“Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks,” the Fed said in the report, which is based on anecdotal information.
Pending home sales are considered a leading indicator because they track contract signings. Purchases of previously owned homes are tabulated when a contract closes, typically a month or two later.
Sales of existing homes, which now make up about 90 percent of the market, fell more than forecast in October as foreclosure moratoriums and a lack of credit disrupted the market, data from the Realtors group showed last week. In July, sales ran at the weakest pace in records going back a decade.
The tax credit worth as much as $8,000 required contracts be signed on April 30 and closed by Sept. 30. Many of the closings occurred in May and June because the original incentive called for transactions to be completed by June 30.
Companies including Beazer Homes USA Inc., which builds houses for first-time buyers, are cautious about next year.
“Sustained high unemployment levels and the overhang of foreclosures make it very difficult to predict when and to what extent the housing market will recover,” Ian McCarthy, chief executive officer of Atlanta-based Beazer, said on a conference call with analysts on Nov. 5.