Pending home sales hit another low in March

From wire reports

May 8, 2008

NEW YORK - Pending home sales dropped to a new low in March, an industry group said yesterday, signaling the housing slump has yet to bottom out even as the spring selling season gets under way.

The National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell to 83.0 from a downwardly revised February reading of 83.8, the index's previous low. It stood at 103.9 in March 2007.

Wall Street economists polled by Thomson/IFR had predicted the index would slip to a reading of 83.8.

A reading of 100 is equal to the average level of sales activity in 2001, when the index started.

The glut of unsold properties is driving down home values, while rising defaults on subprime mortgages have prompted lenders to restrict access to credit, representing more hurdles for buyers.

"Sales are continuing to fall and I think it's largely because buyers are expecting prices to continue to fall," Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, said in a Bloomberg Television interview.

Global Insight economist Patrick Newport expects home sales to fall another 10 percent to 15 percent and bottom out later in the year. Home prices will lose another 10 percent before turning around in mid-2009, he predicts.

The NAR takes on a more optimistic outlook and forecasts sales of existing homes and the economy to pick up in the second half of the year as larger home loans backed by the Federal Housing Administration become more widely available. The FHA recently raised the mortgage limits for loans it guarantees.

"Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas," NAR chief economist Lawrence Yun said.

So far, there's been no evidence that the traditionally strong spring selling season is jump-starting any sales activity.

"The fact that the pending home sales index fell again in March reaffirms fears that the housing market correction still has room to run," a report from Moody's Economy.com said.

On Tuesday, Fannie Mae, the country's largest buyer of home loans, reported a $2.2 billion first-quarter loss, and its CEO said home prices in the period fell "faster than anyone anticipated." The company forecast a nationwide drop in home prices in 2008 of 7 percent to 9 percent.

Moody's Economy.com also expects the weak numbers in March to lead to further softness in April and May since there's usually a one-to two-month lag between when a buyer signs a home sales contract and the closing of the deal.

The NAR expects existing-home sales to edge up to an annual pace of 5.82 million in the fourth quarter from 4.95 million in the first quarter. For the year, the group estimates sales will total 5.39 million and then increase 6.1 percent in 2009 to 5.72 million.

The Associated Press and Bloomberg News contributed to this article.