Surprise Rise In US Existing Home Sales - BT

Source : The Business Times, March 25, 2008

LATEST US DATA

But median home price falls 8.2% from February 2007, the most in 4 decades

(WASHINGTON) Sales of existing homes in the US unexpectedly rose in February for the first time in seven months, easing concern credit restrictions and falling prices would hurt demand.

Purchases increased 2.9 per cent to an annual rate of 5.03 million, the National Association of Realtors said yesterday in Washington. The median home price dropped 8.2 per cent from February 2007, the most in four decades of record keeping.

Sales 'are not quite at a bottom yet, but the pace of decline has definitely abated,' Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, said before the report. 'Getting a stabilisation in home sales is kind of the first step in getting an improvement in prices and in construction activity.'

The real estate market is unlikely to rebound quickly as a glut of houses on the market depresses property values and lenders toughen mortgage with even more requirements to stem credit losses.

The Federal Reserve last week said the outlook had worsened and pledged to do whatever was needed to keep the economy growing.

Economists had forecast existing home sales would decline to a 4.85 million pace for February, according to the median of 63 projections in a Bloomberg News survey. Estimates ranged from 4.69 million to 4.9 million.

January's 4.89 million pace was the lowest since the group began keeping records of combined single- family homes and condominiums in 1999.

Home foreclosure filings jumped 60 per cent and bank seizures more than doubled in February from the same month last year as rates on adjustable mortgages rose and property owners were unable to sell or refinance, according to RealtyTrac Inc, a seller of foreclosure data.

The 'deepening of the housing contraction' was one factor Fed policy makers last week said was likely to hurt growth in coming months.

On March 18, the central bank cut its main lending rate by three-quarters of a percentage point to 2.25 per cent and said recent reports have shown the outlook for the economy has 'weakened further.'

The Fed has cut its benchmark interest rate by three percentage points since September and enacted other measures to try to keep the economy afloat.

On March 16, it reduced the rate on direct loans to banks and said it will provide up to US$30 billion to JPMorgan Chase & Co to help finance the purchase of Bear Stearns after a run on that security firm.

Other government agencies are also struggling to limit the damage in housing. The Office of Federal Housing Oversight lowered the capital requirement on Fannie Mae and Freddie Mac to 20 per cent from 30 per cent last week. The initiative may immediately pump US$200 billion into the mortgage market. -- Bloomberg