US home resales fall 3% in March

US home resales fall 3% in March
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: April 23 2009 14:13 | Last updated: April 23 2009 16:08
http://www.ft.com/cms/s/0/f023bc02-3004-11de-a2f8-00144feabdc0.html


The sales of existing US homes fell in March as buyers avoided purchasing properties that continue to dwindle in value.

Home resales fell by 3 per cent last month to an annual rate of 4.57m, after rising by a revised 4.9 per cent in February, the National Association of Realtors said on Thursday. The monthly decline was worse than economists expected and existing home sales are off by 7.1 per cent on the year.

Separately on Thursday official figures showed that new US jobless claims rose last week after easing the week before while the number of workers continuing to claim unemployment grew to a fresh record high as companies continue to shed workers.

Distressed sales now represent more than half of all transactions and such homes are selling for 20 per cent less than homes not facing foreclosure. First-time buyers accounted for 53 per cent of all purchases in March.

“The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down, according to their needs,” said Charles McMillan, president of NAR.

Existing home sales fell across the US in from February to March in every region except the midwest, where they were unchanged. They also fell year-on-year everywhere except in the west, where sales were up by 18.9 per cent.

Economists remain hopeful that the recent moderation in home resale declines means that the stricken US housing market could be approaching a bottom. A new $8,000 tax credit for first-time buyers is expected to lure more people back to the market.

The glut of housing inventory declined last month, falling 1.6 per cent to 3.74m. That represents and 9.8 month supply at the current pace of sales. Joshua Shapiro, chief US economist at MFR notes that inventories remain high and are likely higher than the figures show because many people who would like to sell their homes have pulled them from the market.

Many buyers have resisted buying homes as values continue to fall, although first-time purchases and distressed sales of houses facing foreclosure are rising. According to NAR the median price of a home in the US fell by 12.4 per cent to $175,200 in March compared with the same month last year. However prices rose by 4.2 per cent from February.

Home prices have fallen by 27 per cent since peaking in July 2006 and economists predict that they will continue to fall until the impact of government stimulus programmes takes effect and rising unemployment begins to abate.

The labour department on Thursday said that initial jobless claims rose by 27,000 to 640,000, in line with economists’ predictions. Those making continuing claims rose from a revised 6.04m to 6.14m in the second week of April, the highest total since tracking began in 1967.

Economists had expected that new jobless claims would rise to 640,000 after easing by a revised 613,000 the week before. That decline had surprised consensus estimates that claims would rise, but many attributed it to the Good Friday and Passover holidays.

The four-week average for new claims was 646,750 last week, an improvement from the 651,000 average the prior week. The four-week average for continuing claims, however, rose by 142,500 to 5.94m.

The insured unemployment rate rose to 4.6 per cent in the week ending April 11 from 4.5 per cent the prior week. According to John Ryding and Conrad DeQuadros, economists at RDQ Economics, the trend of the insured unemployment rate rising by 1 percentage point a week signals another sharp increase in the US unemployment rate.

Unemployment has risen more sharply than US authorities had anticipated and could lead them to consider taking a tougher stance in judging the results of bank stress tests, a development that ultimately could force leading financial groups to hold more capital.

When the stress tests were revealed two months ago, the authorities defined the “adverse” recession scenario as one in which unemployment rose gradually to peak at 10.4 per cent in late 2010.

Earlier this month the labour department said that US unemployment soared to 8.5 per cent last month, its highest level since 1983. Some economists forecast that to reach 8.9 per cent in April.