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LATEST US DATA: Existing home sales down 2.6% in Nov

Stringent lending practices, prospects that prices will keep falling deter buyers

(ATLANTA) The number of Americans signing contracts to buy previously owned homes fell more than forecast in November, signalling further deterioration in housing.

The National Association of Realtors’ index of pending home sales decreased 2.6 per cent to 87.6, following a revised 3.7 per cent gain in October that was larger than previously estimated, the group said yesterday in Washington.

More stringent lending practices after the collapse in sub-prime lending and prospects that home prices will keep falling are deterring buyers, economists said. The housing slump is likely to last well into 2008, hurting economic growth and prompting Federal Reserve policy-makers to lower interest rates.

‘We’re not at the bottom of the housing downturn yet,’ Nigel Gault, chief US economist at Global Insight Inc in Lexington, Massachusetts, said before the report. ‘Prices are probably going to go down for a while. Until people see things stabilising, they’re going to wait.’

Economists forecast the index of signed contracts for existing homes would fall 0.7 per cent following a previously reported 0.6 per cent October increase, according to the median of 33 projections in a Bloomberg News survey.

Estimates ranged from a drop of 3 per cent to a 0.3 per cent increase.

Compared with a year earlier, the index was down 19 per cent.

Yesterday’s report showed pending resales fell in three of four regions. Purchases decreased 13 per cent in the Northeast, 4.1 per cent in the Midwest and 2.1 per cent in the West. Sales rose 2.3 per cent in the South.

The bigger gain in October than previously estimated suggested the market may be stabilising, according to Lawrence Yun, the group’s chief economist.

‘Although there could be some minor slippage in the first quarter, existing home sales should hold in a narrow range before trending up,’ Mr Yun said in a statement. ‘The exact timing and the strength of a home-sales recovery is a bit uncertain.’

There was a 10.3 months’ supply of previously owned homes on the market in November at the current sales pace, compared with an average 6.5 months in 2006 and 4.5 months a year earlier.

That excess is one reason property values are dropping. Home prices in 20 US metropolitan areas fell in October by the most in at least six years, based on the S&P/Case-Shiller home-price index. The decrease, reported last month, was the biggest since the group started keeping year-on-year records in 2001.

Record foreclosures are adding to the supply of unsold homes and will weigh further on prices this year, economists said.

Tougher lending rules are adding to market woes. A third of planned home sales were cancelled or delayed in September, October and November because of loan problems, according to the results of a survey of 2,416 realestate agents issued on Monday.

The Realtors association estimates 5.7 million homes will be sold in 2008, little changed from an estimated 5.65 million last year. Purchases of new homes will fall to 669,000 from 773,000.

 

Source: Bloomberg (Business Times 9 Jan 08)

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