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Business Title: Sales of New U.S. Homes Fell 0.3% in October Purchases of new U.S. homes unexpectedly declined in October, showing limited progress in the housing market recovery. Sales dropped 0.3 percent to a 368,000 annual pace following a revised 369,000 rate in September that was weaker than initially reported, figures from the Commerce Department showed today in Washington. The median estimate of 74 economists surveyed by Bloomberg called for a 390,000 sales pace. Purchases in the last six months have climbed 2.8 percent, showing limited job growth and access to credit are still restraining the residential real estate market. The figures help explain why Federal Reserve Chairman Ben S. Bernanke has singled out housing as one of the industries to nurture in order to spur the economic recovery. “Better job growth is the key factor,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who projected a 365,000 rate of sales. “We really have a lot of ground to make up from the recession.” Stocks extended declines after the figures, with the Standard & Poor’s 500 Index falling 0.8 percent to 1,388.26 at 10:20 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.61 percent from 1.64 percent late yesterday. Estimates in the Bloomberg survey ranged from sales rates of 365,000 to 418,000. The September reading was previously reported as a 389,000 annual pace. The median price for a new house climbed 5.7 percent in October from the same month last year to $237,700. By Region Purchases increased in two of four regions last month, led by a 62.2 percent surge in the Midwest to the highest level in almost three years. Sales in the West jumped 8.8 percent to the fastest pace since July 2008. Home purchases dropped 32.3 percent in the Northeast. The Commerce Department said in a statement that there was “minimal” effect on the data from superstorm Sandy. The supply of homes rose to 4.8 months at the current sales rate from 4.7 months in September. There were 147,000 new houses on the market at the end of October compared with 145,000 a month earlier. Sales of new homes, tabulated when contracts are signed, are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. Newly constructed houses accounted for 6.7 percent of the residential market in 2011, down from a high of 15 percent during the boom of the past decade. Existing Homes Previously owned homes sold at a 4.79 million rate in October, close to the two-year high 4.83 million pace reached in August, according to data released last week by the National Association of Realtors. With fewer distressed properties on the market, prices have started to stabilize. Home foreclosures dropped 19.2 percent in October from a year earlier, according to the RealtyTrac Foreclosure report. In September, they declined to the lowest level since July 2007. Home prices rose in the year ended in September by the most since July 2010, a report yesterday showed. The S&P/Case-Shiller index of property values in 20 cities climbed 3 percent from September 2011, after advancing 2 percent in the year to August, the group said today in New York. Values from July through September, compared with the same period last year, climbed the most since the second quarter of 2010. Builder Confidence Confidence among builders has been climbing as well. The National Association of Home Builders/Wells Fargo builder sentiment index increased in October to the highest level since May 2006. The housing market would accelerate even more if it was accompanied by a bigger pickup in employment, according to homebuilder D.R. Horton. The Fort Worth, Texas- based company, which is the largest U.S. homebuilder by volume, reported fiscal fourth-quarter earnings last week that beat analysts’ estimates. “What we’re seeing is improvement off of an extremely low bottom in the housing market,” William Wheat, chief financial officer at D.R. Horton, said at a Nov. 15 conference. “We’re seeing small amounts of job growth right now. We’re going to need to see more over the long term. Jobs is the No. 1 driver for housing demand.” GDP Contribution Residential construction added 0.33 percentage point to a 2 percent increase in third- quarter gross domestic product, Commerce Department data showed last month. Revised GDP figures will be released tomorrow. Cheaper borrowing costs are at the heart of the pickup in housing demand. The average 30-year fixed rate mortgage was 3.31 percent in the week ended Nov. 22, the lowest on record, according to data from Freddie Mac that dates back to 1971. Bernanke said the Fed will take action to speed growth and the rebound in a housing market. At the same time, lending standard may be preventing a bigger recovery in the market. “We will continue to use the policy tools that we have to help support economic recovery,” Bernanke said in a Nov. 15 speech in Atlanta. While tighter credit standards after a collapse in the subprime mortgage market were appropriate, “it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery,” he said.
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