U.S. Home Resales Fall; Prices Drop by Record 13.2% (Update1)
2008-12-23 15:25:07.146 GMT
(Adds comment in fourth paragraph)
By Shobhana Chandra
Dec. 23 (Bloomberg) -- Sales of previously owned homes in
the U.S. fell more than forecast in November and prices dropped
by the most on record, indicating the real estate slump will
extend into a fourth year and worsen the recession.
Purchases declined 8.6 percent to an annual rate of 4.49
million, from a 4.91 million rate in October that was less than
previously estimated, the National Association of Realtors said
today in Washington. The median price dropped 13.2 percent from
a year earlier, the biggest decline since records started in
1968. Separately, the Commerce Department reported today that
new-home sales fell 2.9 percent last month to a 17-year low.
Prices will plunge further as job losses sap demand,
foreclosures add to the property glut and prospective buyers get
turned away by mortgage lenders. The Federal Reserve this month
cut its benchmark interest rate target to as low as zero and
said it would take more steps to ease borrowing as the longest
postwar recession looms.
“November sales just collapsed,” said Chris Low, chief
economist at FTN Financial in New York. “Price declines are
accelerating. As bad as this is, it’s going to be considerably
worse in a month’s time.”
Resales were forecast to fall to a 4.93 million annual rate
from an originally reported 4.98 million in October, according
to the median estimate of 63 economists in a Bloomberg News
survey. Projections ranged from 3.98 million to 5.2 million.
Sales dropped 10.6 percent compared with a year earlier.
Resales averaged 5.67 million in 2007 and before today’s report,
fluctuated around a 4.96 million rate this year.
The number of previously-owned unsold homes on the market
at the end of November represented 11.2 months’ worth at the
current sales pace, up from 10.3 months’ at the end of the prior
month.
Historic Price Decline
The median price of an existing home fell to $181,300, and
the percentage drop from a year ago was “probably the largest
price decline since the Great Depression,” although records
don’t go back that far, said NAR Chief Economist Lawrence Yun.
Foreclosures and short sales accounted for 45 percent of
last month’s home purchases, Yun said.
Resales of single-family homes fell 8 percent to an annual
rate of 4.02 million. Sales of condos and co-ops declined 13
percent to a 470,000 rate.
Regional Breakdown
Purchases declined in all regions of the country, led by
drops of 12 percent in the Northeast and 10.9 percent in the
South. Sales fell 7.4 percent in the Midwest and 4.3 percent in
the West. Prices also fell throughout the country, led by a
decline of 25.5 percent in the West.
Resales account for about 90 percent of the market. Sales
of existing homes are compiled from contract closings and may
reflect contracts signed one or two months earlier.
New-home sales, recorded when a contract is signed, are
considered by economists to be a more timely barometer.
The Federal Reserve on Dec. 16 cut its benchmark interest
rate target to a range of zero to 0.25 percent, and said it
stands ready to expand purchases of Fannie Mae, Freddie Mac and
Federal Home Loan Bank debt under a program aimed at reducing
mortgage costs.
The average rate on a 30-year fixed-rate loan fell to 5.18
percent in the week ended Dec. 12, the lowest in more than five
years, according to the Mortgage Bankers Association.
President-elect Barack Obama on Dec. 13 said he will
develop plans to limit foreclosures and “dramatically increase
the number of families who can stay in their homes.” One tenth
of U.S. families who own a home are in financial distress, Obama
said.
Homebuilders’ Shares
The S&P Supercomposite Homebuilding Index is down a third
so far this year, reflecting the plight of homebuilders.
Ara Hovnanian, chief executive officer of Hovnanian
Enterprises Inc., New Jersey’s biggest homebuilder, called on
the government to provide an economic stimulus for the housing
industry.
“If government wants to get to the root of the problem
they need to fix housing first,” Hovnanian said in a conference
call on Dec. 17. Hovnanian, whose company reported a fiscal
fourth quarter loss, didn’t specify what type of government
intervention he wants in the housing market.
Related news:
For stories on U.S. homebuilding: {TNI US HOM <GO>}
For stories on the U.S. economy: {TNI US ECO <GO>}
Top Bloomberg News real estate stories: {TOPR <GO>}
--With reporting from Jody Shenn in New York. Editor: Mark
Rohner
To contact the reporter on this story:
Shobhana Chandra in Washington at +1-202-624-1888 or
[email protected]
To contact the editor responsible for this story:
Chris Anstey at +1-202-624-1972 or [email protected]
2008-12-23 15:25:07.146 GMT
(Adds comment in fourth paragraph)
By Shobhana Chandra
Dec. 23 (Bloomberg) -- Sales of previously owned homes in
the U.S. fell more than forecast in November and prices dropped
by the most on record, indicating the real estate slump will
extend into a fourth year and worsen the recession.
Purchases declined 8.6 percent to an annual rate of 4.49
million, from a 4.91 million rate in October that was less than
previously estimated, the National Association of Realtors said
today in Washington. The median price dropped 13.2 percent from
a year earlier, the biggest decline since records started in
1968. Separately, the Commerce Department reported today that
new-home sales fell 2.9 percent last month to a 17-year low.
Prices will plunge further as job losses sap demand,
foreclosures add to the property glut and prospective buyers get
turned away by mortgage lenders. The Federal Reserve this month
cut its benchmark interest rate target to as low as zero and
said it would take more steps to ease borrowing as the longest
postwar recession looms.
“November sales just collapsed,” said Chris Low, chief
economist at FTN Financial in New York. “Price declines are
accelerating. As bad as this is, it’s going to be considerably
worse in a month’s time.”
Resales were forecast to fall to a 4.93 million annual rate
from an originally reported 4.98 million in October, according
to the median estimate of 63 economists in a Bloomberg News
survey. Projections ranged from 3.98 million to 5.2 million.
Sales dropped 10.6 percent compared with a year earlier.
Resales averaged 5.67 million in 2007 and before today’s report,
fluctuated around a 4.96 million rate this year.
The number of previously-owned unsold homes on the market
at the end of November represented 11.2 months’ worth at the
current sales pace, up from 10.3 months’ at the end of the prior
month.
Historic Price Decline
The median price of an existing home fell to $181,300, and
the percentage drop from a year ago was “probably the largest
price decline since the Great Depression,” although records
don’t go back that far, said NAR Chief Economist Lawrence Yun.
Foreclosures and short sales accounted for 45 percent of
last month’s home purchases, Yun said.
Resales of single-family homes fell 8 percent to an annual
rate of 4.02 million. Sales of condos and co-ops declined 13
percent to a 470,000 rate.
Regional Breakdown
Purchases declined in all regions of the country, led by
drops of 12 percent in the Northeast and 10.9 percent in the
South. Sales fell 7.4 percent in the Midwest and 4.3 percent in
the West. Prices also fell throughout the country, led by a
decline of 25.5 percent in the West.
Resales account for about 90 percent of the market. Sales
of existing homes are compiled from contract closings and may
reflect contracts signed one or two months earlier.
New-home sales, recorded when a contract is signed, are
considered by economists to be a more timely barometer.
The Federal Reserve on Dec. 16 cut its benchmark interest
rate target to a range of zero to 0.25 percent, and said it
stands ready to expand purchases of Fannie Mae, Freddie Mac and
Federal Home Loan Bank debt under a program aimed at reducing
mortgage costs.
The average rate on a 30-year fixed-rate loan fell to 5.18
percent in the week ended Dec. 12, the lowest in more than five
years, according to the Mortgage Bankers Association.
President-elect Barack Obama on Dec. 13 said he will
develop plans to limit foreclosures and “dramatically increase
the number of families who can stay in their homes.” One tenth
of U.S. families who own a home are in financial distress, Obama
said.
Homebuilders’ Shares
The S&P Supercomposite Homebuilding Index is down a third
so far this year, reflecting the plight of homebuilders.
Ara Hovnanian, chief executive officer of Hovnanian
Enterprises Inc., New Jersey’s biggest homebuilder, called on
the government to provide an economic stimulus for the housing
industry.
“If government wants to get to the root of the problem
they need to fix housing first,” Hovnanian said in a conference
call on Dec. 17. Hovnanian, whose company reported a fiscal
fourth quarter loss, didn’t specify what type of government
intervention he wants in the housing market.
Related news:
For stories on U.S. homebuilding: {TNI US HOM <GO>}
For stories on the U.S. economy: {TNI US ECO <GO>}
Top Bloomberg News real estate stories: {TOPR <GO>}
--With reporting from Jody Shenn in New York. Editor: Mark
Rohner
To contact the reporter on this story:
Shobhana Chandra in Washington at +1-202-624-1888 or
[email protected]
To contact the editor responsible for this story:
Chris Anstey at +1-202-624-1972 or [email protected]
