Real Estate

Home sales stay weak in Realtors' report

Homes under contract flat in January but remain near record low, showing continued weakness in market.

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By Chris Isidore, CNNMoney.com senior writer

The Pending Home Sales Index was flat in January, remaining at the second lowest reading on record.
The Pending Home Sales Index was flat in January, remaining at the second lowest reading on record.
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NEW YORK (CNNMoney.com) -- The number of homes under contract for sale was unchanged in January, leaving that measure of the battered real estate market just barely above the record low, according to the latest reading from the National Association of Realtors.

The Realtors' Pending Home Sales Index came in at 85.9 in the month, the same as in December, which was the second-lowest reading on record.

The worst came last August at a revised reading of 85.8. That was when a collapse in the market for mortgage-backed securities put a squeeze on financing available for prospective home buyers.

The Pending Home Sales Index is considered a more forward-looking indicator of home sales than the same group's more closely followed existing home sales report, which tracks sales at the time of closing, typically a month or two after a sales contract is signed.

The Pending Home Sales index was started in 2001, and a reading of 100 is equal to results that first year. Going into this year, the record low had been in September 2001, when the 9/11 terrorist attack rattled buyer confidence and sent the index down to 89.8.

But the problems in the mortgage markets and the decline in home values have hit buyer confidence even harder, with the last six months seeing readings at or below that previous record low.

The Realtors also released an updated economic and sales outlook that now sees the sales pace and prices for existing homes during the first half of this year slightly worse than in its February estimate. But it is still sticking with a forecast of a modest turnaround in the second half of the year.

For the full year it sees a 1.2% decline in median home prices, unchanged from its earlier estimate and nearly matching the 1.4% decline posted in 2007, the first year on record that the group has seen a full-year drop in the value of existing homes sold.

The group is forecasting a steeper 6.1% drop in new home prices for the year, wider than its earlier estimate of a 4.3% decline. The glut of new homes for sale on the market, and weak prices, have hit the results of the leading homebuilders.

Luxury homebuilder Toll Brothers (TOL, Fortune 500), the No. 7 builder by revenue, reported a sharp drop in revenue when it reported its second straight quarterly loss a week ago, its only two periods of red ink as a public company.

Earlier in February D.R. Horton (DHI, Fortune 500), the No. 2 homebuilder by revenue, reported a much steeper-than-expected loss in the fourth quarter. That followed a report last month from No. 3 Lennar (LEN, Fortune 500) that showed a $1.25 billion fourth-quarter loss, the largest in the company's history.

In addition No. 1 Centex (CTX, Fortune 500), No. 4 Pulte Homes (PHM, Fortune 500) and No. 5 KB Home (KBH, Fortune 500) all reported fiscal fourth-quarter losses far worse than forecasts in January, as did No. 6 Hovnanian Enterprises (HOV, Fortune 500) when it reported fiscal fourth-quarter results in December.  To top of page

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