Home-Sale Weakness
Likely to Continue
by Jeff Bater and Maya Jackson Randall
From The Wall Street Journal Online
February 07, 2008
A forward-looking indicator of existing-home sales fell in December, signaling more softness ahead for the housing market.
Meanwhile, the number of U.S. workers filing new claims for unemployment benefits fell last week, said a government report Thursday that seems to temper the stunning surge reported a week earlier.
The National Association of Realtors' index for pending sales of previously owned homes decreased at a seasonally adjusted annual rate of 1.5% to 85.9 in December from November's 87.2, the industry group said Thursday.
NAR chief economist Lawrence Yun said sales activity is expected to remain soft through the first half of the year despite low mortgage rates.
"Existing-home sales have moved narrowly since last September, but when the full impact of higher loan limits for conventional mortgages begins to impact the market, there is likely to be a notable rise in home sales and prices," Mr. Yun said.
"If higher limits are enacted very quickly, we'll see a faster and more meaningful recovery by expanding safe, affordable financing in high-cost areas -- that, in turn, would help to stimulate overall economic activity," he said.
In its monthly forecast on the industry, the NAR projected existing-home sales at 5.38 million this year and 5.60 million in 2009. That compares with 5.65 million in 2007. Existing-home prices are expected to fall 1.2% to a median of $216,300 for all of 2008 and then climb 3.2% to $223,200 in 2009, the NAR said. A month ago, NAR projected 2008 sales at 5.70 million.
The NAR pending sales index, based on signed contracts for previously owned homes, was 24.2% below the level of 113.3 in December 2006.
The NAR's pending home sales index was designed to try measuring which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.
By region, the Northeast decreased 1.7% in December from November; it fell 26.0% since December 2006. The Midwest climbed 3.4% in December from November; it tumbled 17.3% since December 2006. The South decreased 3.0% in December from November; it dropped 27.0% since December 2006. The West decreased 3.1% in December from November; it declined 24.1% since December 2006.
Jobless Claims Drop
Initial claims for jobless benefits fell by 22,000 to 356,000, after seasonal adjustments, in the week that ended Feb. 2, the Labor Department said in its weekly report.
The previous week was revised up to 378,000 from 375,000.
That 375,000 level reported last week was the highest level since October 2005 and had reversed four straight weeks of declines.
However, some analysts didn't take the spike as a sign of a weakening job market because the jump may have been due to technical factors surrounding the recent Martin Luther King Holiday.
The number of new jobless claims filed nationwide in the week ending Feb. 2 was still higher than what Wall Street had expected. Economists surveyed by Dow Jones Newswires expected a decrease of 32,500 to 342,500 for the week ending Feb 2.
A Labor Department analyst said there were no special factors.
The four-week average of new claims, which economists use to smooth out weekly volatility, rose by 8,500 to 335,000.
According to the Labor Department report Thursday, the number of workers drawing unemployment benefits for more than one week, also known as continuing claims, jumped by 75,000 to 2,785,000 in the week ended Jan. 26. That's the highest it's been since October 2005. The four-week average of those continuing claims jumped by 24,250 to 2,727,750 -- the highest since November 2005.
The unemployment rate for workers with unemployment insurance rose from 2.0% to 2.1% in the Jan 26 week.
On an unadjusted basis, Wisconsin reported the biggest increase in new claims, up 2,335, the week of Feb. 2 due to layoffs in the construction, trade, transportation, warehousing and manufacturing industries. Michigan reported the biggest decrease, at 7,546 due to fewer layoffs in all industries.
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