Home sales sink, outlook darkens
Pace of pending sales slows again; realtors now see biggest drop in home values at start of '08; forecast for price rebound pushed back to '09.
NEW YORK (CNNMoney.com) -- Contracts to sell existing homes fell in November and there could be darker days ahead for home values, which are expected to post their biggest decline on record this quarter as a full-year rebound in prices now isn't expected until 2009, according to an industry trade group.
The National Association of Realtors' Pending Home Sales Index, which measures the level of sales agreements, fell 2.6 percent to 87.6 in November, turning lower after two months of modest improvement from a record low hit in August. Economists surveyed by Briefing.com had forecast only a 0.8 percent decline.
The Realtors also cut its existing home price estimate for the current quarter to a 5.3 percent year-over-year decline, which would mean the current period would see the steepest drop in that price measure on record.
Only a month ago the group's estimate was for only a 2.5 percent drop in prices in the first quarter.
The group's forecast released Tuesday also no longer sees even a modest rebound in existing home prices this year, as it had previously forecast, and pushed back the estimate of a full-year uptick in prices to 2009.
The latest reading on pending home sales is better only than the pace of sales in August and September, when the meltdown in mortgage markets cut off the availability of mortgage financing for many buyers.
"It's not surprising, but it's certainly not good news," said Mike Schenk, senior economist at Credit Union National Association. "We may be near the bottom. But the trouble is we're likely to stay at or near the bottom for a while. It's going to take us 6 to 9 months to claw our way out of this situation, at least."
The November reading is even worse than the 89.8 reading recorded in September 2001, the month when terrorist attacks shook buyer confidence. That reading had been the weakest month on record before the current housing downturn. An index reading of 100 represents the level of sales at the start of 2001, when the index was started.
In its first forecast for sales and the economy through 2009, the group said it expects a 3.1 percent rebound in existing home prices next year. But the trade group now sees existing home prices remaining flat this year, rather than its previous forecast of a narrow 0.3 percent recovery from 2007 levels.
"Consumers continue to wait for additional signs of market stabilization," Lawrence Yun, chief economist for the Realtors, said in a statement. "There are more people with financial capacity now than in 2005, but many are trying to market-time their purchase. As a result, the exact timing and the strength of a home sales recovery is a bit uncertain."
The report came the same day that one of the nation's largest builders, KB Home (KBH, Fortune 500), reported a large widening of its quarterly loss. The loss was much worse than forecasts due largely to writedowns in the value of its holdings and the cost of getting out of some land purchase options.
KB Home is not the only builder to be hit by large charges due to the downturn in the housing market. No. 1 builder Lennar (LEN, Fortune 500), as well as No. 2 Centex (CTX, Fortune 500), No. 4 Pulte Homes (PHM, Fortune 500) and No. 6 Hovnanian Enterprises (HOV, Fortune 500), all reported bigger-than-expected quarterly losses due to such charges.
While No. 3 builder D.R. Horton (DHI, Fortune 500) reported a smaller-than-expected loss in late November, that followed a quarter with a loss that was much wider than forecast. In December, luxury home builder Toll Brothers (TOL, Fortune 500) posted its first loss in 22 years as a public company.