Housing market may see a long cold winter

By Alan Zibel
Associated Press / January 6, 2010

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WASHINGTON - The number of people preparing to buy a home fell sharply in November, an unsettling new sign that the housing market could be headed for a “double-dip’’ downturn over the winter.

The figures came yesterday after a similarly discouraging report on new home sales, showing how heavily the housing market depends on government help.

In October, buyers raced to get contracts signed in time to take advantage of a tax credit for first-time homeowners that was set to expire. It has since been extended into spring, but prospective buyers are taking their time.

The National Association of Realtors said its seasonally adjusted index of sales contracts fell 16 percent from October to November, ending nine months of gains. Economists surveyed by Thomson Reuters had expected a 2 percent drop.

“This was bound to happen at some point, although not by this much,’’ wrote Jennifer Lee, senior economist at BMO Capital Markets. She added: “Gulp.’’

When the tax credit expires this spring and the government phases out programs to keep mortgage rates low, the housing market will have to stand on its own. Many doubt it can.

The expected decline in home sales and prices this winter appears to pose less of a threat to the broader economy, though.

Factory orders, for example, posted a big gain in November, the Commerce Department said Tuesday.

“We expect housing to just limp along even as the rest of the economy is growing fairly strongly,’’ said a Nomura Securities economist, Zach Pandl.