In May, property resales slid once again
WASHINGTON - Contracts to buy previously owned US homes declined more than forecast in May, a sign prices that have been sliding for more than two years have yet to touch bottom.
The index of pending home resales fell 4.7 percent following a revised 7.1 percent gain in April that was greater than previously reported, the National Association of Realtors said yesterday.
The prospect of further price declines may be discouraging offers, while rising mortgage rates and tougher lending standards make it harder to qualify for loans. The Federal Reserve reported non-real-estate consumer borrowing increased more than forecast in May, as Americans turned to credit cards after banks restricted access to home-equity lines of credit.
"Homes are much more affordable, but they'll probably be even more affordable in six months' to 12 months' time, so it makes people reluctant to jump in," Nigel Gault, chief US economist at Global Insight Inc. in Lexington, Mass., said. "The message is that last month's big rise was not the signal that the market is starting to turn around. We've had a big correction this month."
Economists had projected the pending sales index would fall 3 percent, according to the median forecast in a Bloomberg News survey of 38 economists. Estimates ranged from a drop of 6 percent to a 0.2 percent gain.
Pending resales were down 14 percent from May 2007, yesterday's report showed.
The measure dropped in all regions of the country, led by a 7.1 percent decline in the South. Pending resales fell 6 percent in the Midwest, 2.9 percent in the Northeast, and 1.3 percent in the West. Compared with a year ago, contract signings were up 2 percent in the West and were lower in the other regions.
The gains in the West may be a positive sign for the outlook nationwide, said Kenneth Baris, president of Jordan Baris Inc. Realtors, a real-estate brokerage based in West Orange, N.J.
Karl Case, cofounder of a home-price index that bears his name, predicted last month that almost half the US housing market will be over the worst of the housing slump by year-end.
There may be "some surprises in the next few months that would indicate we are at or near a bottom in probably one-third to one-half of the country," Case, an economics professor at Wellesley College in Wellesley, Mass., said in a June 24 interview.
The pending home resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report.
The Realtors group will release its report on June existing home sales on July 24. Purchases in May rose 2 percent to a 4.99 million pace, from a 4.89 million rate the prior month that was the lowest level in at least nine years. At the May sales rate, it would take 10.8 months to sell all the houses on the market.
Continued declines in home prices and increases in mortgage rates will probably extend the slump in sales.
