From the Wall Street Journal:
An index that tracks contracts to buy previously owned U.S. homes fell 1.2% in August, clouding an already-bleak outlook for the housing sector, the National Association of Realtors said Thursday.
The index of pending home sales, which reflects contracts signed but deals not yet closed, fell to 88.6 from 89.7 in July. That is higher than August 2010—but last year’s levels plummeted after a federal tax credit for homebuyers expired.
The Northeast saw the biggest declines, which the trade group partly blamed on Hurricane Irene delaying deals. NAR chief economist Lawrence Yun also cited tight credit conditions and Americans’ hesitance to form households, such as college graduates and new entrants to the work force still living with their parents, amid an uncertain economy.
Citing record-low interest rates and rock-bottom home prices, economists say the housing market should be much further along in recovering. “It’s a pretty good time to get involved in the market, but a lot of people are unable to take advantage of this situation,” said Paul Dales, senior U.S. economist for Capital Economics, a macroeconomic consultancy.
Mr. Dales partly blamed the weak labor market and stagnant income growth. “There also is a general decrease in the desire of people to own a home,” he said. “Under normal times, the housing market would rebound very quickly. But the legacy of recession and the financial crisis means that won’t happen.”
The housing market has remained sluggish despite mortgage rates that have fallen to their lowest levels in more than 60 years. The 30-year fixed-rate mortgage averaged 4.01% for the week ended Thursday, according to a survey by Freddie Mac.
Also from the WSJ:
Here’s what industry watchers had to say:
Joshua Shapiro, economist, MFR Inc.: “In absolute terms this is a very depressed level, and with prices in most areas either still declining or flat, there is little incentive for buyers to be aggressive. Therefore, the overhang of unsold homes (particularly with huge amounts either in the foreclosure process or soon to be in it) is likely to persist for a prolonged period of time.”
Dan Oppenheim, builder analyst, Credit Suisse: “It is still clear that heightened economic concerns are taking a toll on already-fragile homebuyer confidence, offsetting the benefits of favorable affordability. Additionally, our checks suggest the intention to keep rates at low levels for a prolonged period and little expectation for a near-term rebound in home prices is leading to a lack of urgency among buyers.”
Adam Rudiger, builder analyst, Wells Fargo: “Despite very attractive mortgage rates (the average Freddie Mac 30-year fixed rate mortgage rate in August was 4.27% versus 4.55% in July and 4.43% in August 2010), turnover in the existing market remains depressed.”
Michael Rehaut, builder analyst, J.P. Morgan: “We continue to believe that housing demand effectively remains near its cyclical trough and is unlikely to retest its [fourth-quarter 2008/first-quarter 2009] lows, absent another material recession. Moreover, we believe supply continues to remain manageable, as existing homes for sale are 22% below peak levels and foreclosures continue to liquidate at a moderate pace.”