Pending home sales down 16% in November

The number of contracts to buy previously owned US homes fell more than forecast in November as Americans waited for a first-time buyer tax credit to be extended.

The index of signed purchase agreements, or pending home sales, dropped 16 per cent after a revised 3.9 per cent October gain that was more than initially reported, the National Association of Realtors said yesterday in Washington. It was the first decrease in 10 months.

The figure shows housing may be at risk of weakening when homebuyer incentives, which were extended in November, expire later this year. Unemployment close to a 26-year low and weaker consumer finances remain hurdles to a sustained acceleration in home sales that would help fuel the economy.

‘There will be a couple of months where you’ll see noticeable weakness in home resales,’ Joshua Shapiro, chief US economist at Maria Fiorini Ramirez Inc in New York, said before the report. ‘I don’t expect the trajectory we’ve seen over the past three to six months to be maintained.’

Sales were projected to fall 2 per cent after an originally reported gain of 3.7 per cent in October, according to the median of 35 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 12 per cent to a 3.9 per cent increase.

Compared with November 2008, pending sales were up 19.3 per cent, the real estate group said.

All four US regions registered decreases in November, led by 26 per cent slumps in the Northeast and Midwest. Pending sales dropped 15 per cent in the South and 2.7 per cent 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.

Transactions had to close by Nov 30 for buyers to qualify for the tax credit, which explains why resales continued to rise through November.

Separately, factory orders in the United States rose in November more than twice as much as anticipated, led by gains in demand for business equipment that indicate companies are boosting spending and production.

Bookings rose 1.1 per cent, the seventh increase in eight months, figures from the Commerce Department showed yesterday in Washington. The median estimate of economists surveyed by Bloomberg News called for a 0.5 per cent gain.

Source: Business Times, 6 Jan 2010