Pending Sales of Existing Homes Probably Declined in January

By Shobhana Chandra

March 3 (Bloomberg) -- Fewer Americans signed contracts to buy previously owned homes in January, signaling the housing slump will extend well into a fourth year, economists said before a private report today.

The index of pending home resales fell 3.5 percent after a 6.3 percent gain in December, according to the median forecast in a Bloomberg News survey of 32 economists.

A lack of credit and record foreclosures that are pushing property values even lower may keep prospective buyers out of the market for much of 2009. President Barack Obama has pledged to try to keep more Americans in their homes and to create jobs as his administration works to avert what threatens to become the worst recession in the postwar era.

“Home prices will probably keep falling into early 2010 because of pressure from foreclosures and credit concerns,” said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. “We’ll have a very weak housing market.”

The National Association of Realtors’ pending resales report is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from declines of 0.8 percent to 5 percent.

Pending resales are considered a leading indicator because they track contract signings. The Realtors’ existing-home sales report tallies closings, which typically occur a month or two later. The pending index was first published in March 2005 and included data going back to January 2001.

Sales Drop

Sales of previously owned homes, which account for about 90 percent of the market, fell in January to the lowest level since 1997, according to the Realtors group. New-home purchases, which make up the rest, plunged to the lowest level since records began in 1963, Commerce Department figures showed.

The median price for existing and new houses decreased in January from a year ago, the reports showed.

The Standard & Poor’s 500 Supercomposite Homebuilding Index fell 20 percent in the first two months of this year as sales plunged. The index dropped 76 percent over the last three years. Pulte Homes Inc., the largest U.S. homebuilder, last month reported its ninth consecutive quarterly loss.

Housing-related companies are also struggling. Home Depot Inc., the largest home-improvement retailer, had a fourth-quarter loss, closed its Expo design unit and is cutting about 7,000 jobs.

“The home improvement market in 2009 will remain just as challenging as 2008,” Chief Executive Officer Frank Blake said in a statement on Feb. 24.

Economy Shrinks

The economy shrank at a 6.2 percent annual rate in the fourth quarter, the most since 1982, revised government figures showed last week. Home construction contracted at a 22 percent pace following a 16 percent decline in the prior quarter.

Policy makers are counting on a series of steps to stem the deterioration. Obama last month introduced a plan to help as many as 9 million people restructure mortgages to avoid foreclosures. The Treasury Department is doubling the amount of stock purchases of Fannie Mae and Freddie Mac, the mortgage-finance companies now under government control.

Federal Reserve Chairman Ben S. Bernanke last week warned the recession may last into 2010 unless policy makers can stabilize the financial system.

                         Bloomberg Survey

=========================================
                          Pending
                            Homes
                             MOM%
=========================================

Date of Release              03/03
Observation Period            Jan.
-----------------------------------------
Median                       -3.5%
Average                      -3.3%
High Forecast                -0.8%
Low Forecast                 -5.0%
Number of Participants          32
Previous                      6.3%
-----------------------------------------
4CAST Ltd.                   -2.5%
Action Economics             -3.1%
AIG Investments              -4.5%
Ameriprise Financial Inc     -3.0%
Barclays Capital             -3.5%
BBVA                         -2.0%
BMO Capital Markets          -5.0%
Briefing.com                 -3.5%
Commerzbank AG               -3.0%
DekaBank                     -5.0%
Deutsche Bank Securities     -4.0%
DZ Bank                      -4.0%
Fortis                       -3.0%
Herrmann Forecasting         -4.1%
High Frequency Economics     -5.0%
HSBC Markets                 -3.5%
IDEAglobal                   -1.5%
Informa Global Markets       -4.0%
ING Financial Markets        -1.0%
J.P. Morgan Chase            -4.0%
Janney Montgomery Scott L    -4.5%
Moody’s Economy.com          -2.0%
Ried, Thunberg & Co.         -5.0%
Schneider Foreign Exchang    -4.7%
Scotia Capital               -2.0%
TD Securities                -3.0%
Thomson Reuters/IFR          -0.8%
UBS Securities LLC           -3.5%
University of Maryland       -1.5%
Wells Fargo & Co.            -3.1%
Westpac Banking Co.          -1.0%
Wrightson Associates         -5.0%
=========================================

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net