Pending Home Resales Down 3.2%

Source : The Business Times, September 10, 2008

LATEST US DATA

Higher than forecast fall in July points to growing glut of unsold properties

(WASHINGTON) Fewer Americans than forecast signed contracts to purchase previously owned homes in July, a sign that slowing demand will keep adding to the glut of unsold properties.

The index of pending home resales fell 3.2 per cent after a revised 5.8 per cent gain in June, the National Association of Realtors said yesterday in Washington. The decline is the fourth this year as tighter credit conditions keep would-be buyers from taking advantage of lower prices.

Thirty-year fixed-rate mortgages averaged 6.29 per cent in July, up from an average of 5.81 per cent in the first half of the year. The US government's takeover of Fannie Mae and Freddie Mac, which own or guarantee almost half of American home loans, aims to ensure that mortgage funds remain available and to minimise further declines in the housing market.

'Both the pricing and availability of mortgages remain very restrictive and are major impediments to a rebound in sales,' said Richard DeKaser, chief economist at National City Corp in Cleveland.

Economists had projected the index would fall 1.5 per cent, according to the median of 39 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3.5 per cent to a 2 per cent gain.

Pending resales were down 6.8 per cent from July 2007, yesterday's housing report showed. Resales dropped the most in the west, where they were down 10.6 per cent from June. They fell 7.5 per cent in the north-east and were unchanged in the south. Pending sales increased 2.8 per cent in the mid-west.

Compared with a year ago, pending resales were down in all regions except the west.

The pending resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors.

Meanwhile, the Commerce Department reported yesterday that inventories at US wholesalers rose 1.4 per cent in July, twice what analysts had forecast, while sales were down 0.3 per cent, the Commerce Department reported yesterday.

Wall Street analysts polled by Reuters were expecting inventories to rise 0.7 per cent, compared with a 0.9 per cent gain in June, previously reported as 1.1 per cent.

The inventory-to-sales ratio, a measure of how long it would take to sell stocks at the current sales pace, rose to 1.07 months' worth in July from 1.06 months' in June.

The ratio for automotives rose to 1.68 months', the highest since 1.72 months' in December 1997.

While sales declined in July, they rose 3 per cent in June, up from the previously reported 2.8 per cent gain. They also rose 16.5 per cent from a year earlier, and inventories increased 10.6 per cent from July 2007. -- Bloomberg, Reuters