Thread: Home Sales Fall, Reverse Four-Month Course

Home Sales Fall, Reverse Four-Month Course

Friday, September 25, 2009 2:38 PM

WASHINGTON -- Sales of previously owned homes in the United States unexpectedly fell for the first time in four months in August, indicating a less vigorous pace of economic recovery from a deep recession.

The sales drop overshadowed other data showing a fall in the number of U.S. workers who filed new jobless benefits claims last week.

Separately, central banks in the United States and Europe on Thursday moved to scale back massive injections of dollars into the banking system as financial markets stabilize after the worst global financial crisis since the 1930s.

The National Association of Realtors (NAR) said sales of existing U.S. homes fell 2.7 percent to an annual rate of 5.10 million units, disappointing market expectations for a rise to a 5.35 million unit pace. That was the first fall since April.

Another report from the U.S. Labor Department showed new claims for unemployment benefits unexpectedly fell 21,000 to a seasonally adjusted 530,000 last week. Analysts polled by Reuters had expected initial claims to rise to 550,000.

The housing report did little to change views the economy is recovering from its worst recession in 70 years but raised doubts about how long the rebound will last.

"Everyone knows the third quarter (economic growth) is going to be very good, the question is how sustainable is this recovery and will the housing market be able to fly on its own once the emergency government aid is removed," said Zach Pandl, an economist at Nomura Securities International in New York.

The Federal Reserve -- the U.S. central bank -- on Wednesday acknowledged activity had picked up and noted the improvement in the housing sector when it left its key overnight lending rate near zero.

A top White House economic adviser, Christina Romer, said on Thursday the U.S. economy was "back from the brink", but warned policy-makers against removing fiscal and monetary stimulus too quickly.

Stocks on Wall Street dropped on the homes report and worries that authorities might be curbing stimulus too soon. Government bond yields fell as the data strengthened perceptions the economic recovery could falter once stimulus from government spending fades.

Leaders of the G20 group of rich and developing nations were gathering in Pittsburgh on Thursday to discuss ways of rebalancing the world economy to prevent another banking crisis and recession.

SELF-SUSTAINING RECOVERY SOUGHT

U.S. home sales have been boosted in recent months by an $8,000 government tax credit for first-time buyers and an improving economic picture as well as the lowest prices and mortgage rates in decades.

The tax credit expires at the end of November and NAR chief economist Lawrence Yun said the industry group was lobbying to have it extended into next year to avoid what he called a double-dip recession for the housing market.

A housing sector collapse was the main force behind the recession, which started in December 2007.

"The housing market is close to reaching a point of self-sustaining recovery. We are pushing for the extension of the tax credit so that we achieve this," Yun told reporters.

The decline in August sales was a minor retreat after a strong rise in July, Yun said, and issues related to appraising home values could have led to delays or cancellations of contracts to buy homes. Pending sales contracts rose in July.

Despite the monthly decline, August's sales pace was the second-highest in 23 months, and sales of previously owned homes rose 3.4 percent compared to August last year.

The August national median home price of $177,700, off 12.5 percent from August last year, continued to be weighed down by distressed properties, which accounted for 31 percent of sales last month.

The inventory of existing homes for sale in August fell 10.8 percent to 3.62 million units from July, the NAR said. August's sales pace left the supply of previously owned homes on the market at 8.5 months from 9.3 months' worth in July.

"Supply is getting close to the level of 7.5 months that has historically been consistent with stable house prices," said Paul Dales, U.S. economist at Capital Economics in Toronto.

"That said, home sales remain 30 percent below their peak and the fall back in August illustrates that the recovery is going to be gradual and patchy rather than quick and firm."

Stubbornly high unemployment continues to cast a pall over the strength of the economic recovery, which many economists agree is already under way.

While fewer workers submitted applications for unemployment benefits last week, analysts said initial claims had to fall below 500,000 to signal a recovery in the labor market.

"The labor market is stabilizing. We're not quite down to the level that would signal that the economy is creating more jobs than it is losing, but we could reach that point later this year or early next year," said Gary Thayer, a strategist at Wells Fargo Advisors in St. Louis, Missouri.

The four-week moving average of new claims -- considered a better gauge of labor market trends -- dipped to 553,500, the lowest since late January, the Labor Department said.

The number of workers continuing to draw unemployment aid after an initial week of benefits fell 123,000 to 6.138 million in the week ending September 12.

Analysts said the steady decline in weekly jobless claims bodes well for September's U.S. nonfarm payrolls report due on Friday, October 2.

http://moneynews.newsmax.com/markets/ho ... 64898.html

"Everyone knows the third quarter (economic growth) is going to be very good, the question is how sustainable is this recovery and will the housing market be able to fly on its own once the emergency government aid is removed," said Zach Pandl, an economist at Nomura Securities International in New York.

And who is everyone? Does that include the American workers who are currently living in their cars, while their contributions to the government through taxes are benefitting the mega corporations?

I agree ... where do these people come up with this "Everyone knows the third quarter (economic growth) is going to be very good

this is a very reckless statement... Wall street may do well... but Main street is a Train wreck

The economic pundits should get out of their cubicles and spend some time in the real world. Statistics are wonderful but they are getting very screwy. Whatever happened to the money supply reports--gone as they were not important. They can be found but it takes a lot of hunting through the websites.
Then there are the stats of prices (the PPI, I think) where you throw out food and fuel as too volatile and to get to the core price and everything is hunky-dory.
Payroll stats are for non-farm jobs, while not counting the small business owner who works for him/herself or the independent contractors not eligible for unemployment when they go belly-up.
And we seem to be stuck on only 12 million illegals for years, while more crawl across the border daily. Are the day laborers harassing customers at Home Depot even counted.
Going to a water meeting, when FL streams were some of the most polluted in the country, the DEP decided to divide each stream into sections. If a toxic spill happened it one section, it was like no other section downstream could be polluted. When that crap didn't work, they changed the rule again: to be called a polluted waterway, it had to be polluted for 3/4 of the year. I nearly threw something with that pronouncement.

Congress and the Prez are just playing the old shell game. As previous posts on ALIPAC and other places have stated, much of the so=called stock market recovery was funded with bail-out money. It was not based on true investor confidence, or by any other true signs of recovery other than a small up-tick in home sales and Cash for Clunkers sales. However, the increase in home sales was no more genuine than the auto sales because it was driven by ridiculously low interest rates, an $8000 tax credit for first time buyers, and foreign investors unloading some of their dollars for US real estate at depressed values. None of this indicates a true return of consumers to the equation. In fact savings rates are still at a record high, and general spending rates are reduced. The only increase this summer in consumer spending was directly linked to a short term spike in gasoline prices. Do the math. Consumer spending is low; consumers savings are at record highs; unemployment is at double digits in many states and increasing, not decreasing; back out the speculators and the tax credit and home sales are decreasing not increasing; most of us are now waiting with bated breath for massive inflation to kick in. No one in their right mind could conclude from this that the recession is over and good times are just around the corner. All the stimulus money and tax credits and Cash for Clunkers programs were intended to help 'jump start' the economy. Well, it has worked about as well jump starting a dead battery that won't charge. You can get the motor running temporarily, but since the battery won't (can't) re-charge itself, as soon as the motor is turned off, you are back to square one again where another jump start is needed. And another, and another, etc.