Pending home sales tumble, optimism crumbles
WASHINGTON – Pending sales of previously owned U.S. homes fell to a record low in February and consumer confidence hit a new low this month, according to reports on Tuesday that heightened recession fears.
The National Association of Realtors’ Pending Home Sales Index, based on sales contracts signed in February, dropped a bigger-than-expected 1.9 percent to 84.6 from January to the lowest level on record dating to 2001.
Separately, Investor’s Business Daily and TechnoMetrica Market Intelligence said their consumer optimism index showed confidence at its weakest since they began tracking it in 2001.
“I think if you are looking at job growth, now negative, and consumer spending is going to slow, to me it’s a recession,” said Joseph LaVorgna, chief economist at Deutsche Bank in New York.
Compared with February 2007, pending home sales were down 21.4 percent, according to the real estate trade group.
U.S. Treasury bond prices were up slightly in late morning trades, while the Dow Jones industrial average (.DJI) was down nearly 30 points.
Economists polled ahead of the housing report were expecting a decline of 0.7 percent. While February’s reading was worse-than-expected, January’s index was revised up to show a 0.3 percent gain after an initial flat reading.
“The data suggest we haven’t really seen a bottom yet in the housing market,” said Scott Brown, chief economist at Raymond James & Associates in St Petersburg, Florida.
Troubles in the housing market and weak consumer confidence are expected to continue as borrowers find it hard to secure new mortgages and other forms of credit.
The U.S. Federal Reserve has already lowered benchmark interest rates by 3 percentage points since mid-September in an effort to jump-start the economy. Policy-makers are expected to lower them again at their next meeting on April 29-30.
“There’s nervousness out there and although the Fed has lowered interest rates, the credit markets are dysfunctional and scared,” said Bob Moulton, president of the Americana Mortgage Group in Manhasset, N.Y. “It doesn’t help the situation, people used their houses as ATMs. Money is tough to get right now and if you can get it you have to pay for it.”
HOUSING PICKUP LATER?
Despite weaker pending home sales in February, the real estate group said it expects existing home sales to stabilize soon and then pick up in the latter half of this year.
“Exceptionally weak home sales related to jumbo loans’ problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year,” said NAR chief economist Lawrence Yun.
On consumer optimism, the picture is fast deteriorating.
Investor’s Business Daily and TechnoMetrica Market Intelligence said their economic optimism index fell to 39.2 in April from March’s 42.5. That was well below the 50 level that separates pessimism from optimism.
The previous historic trough of 41.2 was hit in September 2005, when consumer sentiment was severely weakened in the aftermath of Hurricane Katrina.
“The bad news during the month includes a jump in the … unemployment rate and repeated speeches by (presidential) candidates telling us what’s wrong with the economy,” said Terry Jones, associate editor of Investor’s Business Daily, in a statement accompanying the data.
Government data released on Friday showed U.S. employers cut payrolls in March for a third straight month and the jobless rate jumped to a 2-1/2-year high.