Home Sale Decline Continues Amid Bleak Economic Forecast

Pending home sales continued to decline in November, according to data released Tuesday by the National Association of Realtors. An index of sales contracts on existing U.S. homes fell 4 percent in November from the previous month and 5.3 percent from the prior year. The index seen in October, originally reported at a 0.7 decline to 88.9, was revised to an index of 85.7, indicating a much steeper decline than estimated at the time. Indices fell across the nation with pending home sale declines of 7.2 percent in the Northeast region, 6.7 percent in the Midwest, 2.4 percent in the West and 2.2 percent in the South. In the face of bleak numbers, NAR economists urged Congressional action on a possible real estate-focused stimulus plan that would offer incentives to borrowers and “unclog the mortgage pipeline.” “It’s crucial for Congress and the new administration to move quickly to remove impediments and offer home buyers the incentives they need to tap into today’s historic low mortgage interest rates,” said NAR president Charles McMillan, a broker at Dallas-based Coldwell Banker Residential Brokerage. In the mean time, home prices and sales volumes have continued to decline, according to data released Tuesday by New York-based real estate data and analytics firm Radar Logic Inc. Prices and sales volume decreased more in Oct. 2008 than in any other Oct. since the company’s data set began in Jan. 2000. Home prices among the company’s 25-city metropolitan statistical area (MSA) index fell fell 2.7 percent in October alone, the largest decline recorded by the company. Five MSAs saw their largest month-over-month price declines, Radar Logic said in a press statement, while 13 MSAs saw their largest year-over-year declines. As bad as it sounds, things may have to get worse before they get better, according to a survey of 25 economists conducted in December by the Bureau of National Affairs Inc. (BNA) The survey results, released last week, suggest a general consensus that the recession will last another six months before easing, and that recovery in the financial markets will be slow. “The gradual resumption of growth starting in the third quarter is likely to hinge on the success of the federal government’s massive economic stimulus and financial intervention efforts,” BNA analysts said in a press statement. Economists surveyed indicated a belief the Federal Reserve will maintain the historic low target for key interest rate — now holding at a range of zero to 0.25 percent — before raising it at the end of 2009. Because of the Fed’s efforts, the survey respondents indicated inflation is likely to remain low, while core inflation will slow. And, while the BNA survey suggests federal economic stimulus may help resolve the financial crisis, the survey’s respondents warn there are likely hurdles to a full recovery. “Major risks to the economy include uncertainty about the extent of bad investments in mortgage and other securities,” BNA analysts wrote. Read the NAR report. Write to Diana Golobay at [email protected].