WASHINGTON — The National Association of Realtors reported this week that the Pending Home Sales Index of existing sales agreements fell 2.6% in November to 87.6%, ending a slight two-month up tick. The NAR also revised its existing home price estimate for this quarter to a 5.3% year-over-year decline, making for the biggest decline on record.
CUNA Senior Economist Mike Schenk was quoted in MarketWatch on the housing slump, saying, "We are fairly close to the bottom here. We'll see more price movement, but we'll probably limp along for a while."
The NAR abandoned its rosier outlook for even a slight rebound this year, revising its forecast of a price rebound in home values into 2009.
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The jobs outlook also took a hit, with NAFCU staff economist Katrin O'Connor noting in the credit union trade's Macro Data Flash that December's non-farm payrolls increased only 18,000, "the smallest increase since August 2003." Payroll losses were hardest hit in the construction area (49,000) manufacturing (31,000) and retail trade (24,000)–all of which reflect the downturn in the housing sector. "The number of discouraged workers increased by almost one-third," said O'Connor. The strain has grown more acute, she added, suggesting that the Federal Open Markets Committee will likely cut rates again at their next meeting, scheduled for Jan. 29-30.
"This news will help tilt the scales toward another possible rate cut at the [Federal Open Market Committee's] January meeting," agreed Brian Turner, Manager of Advisory Services for Southwest Corporate, Plano, Texas. "For 2007, total payrolls increased 1.33 million," he said. While the smallest increase in four years, the figure nevertheless shows the resiliency of the economy given the major strains put on it from the housing sector, subprime mortgage chaos and record high energy costs, remarked Turner. He said the US unemployment rate for 2007 averaged 4.6%.
Lawrence Yun, chief economist for the NAR tried keeping an optimistic outlook, commenting, "Although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up." He forecast a 0.9% rise in existing-home sales in 2008 to 5.7 million, which is up from the expected 0.4% gain last month. For the year ahead, Yun predicted sales to rise 3.6%.
It might take as long as a year to bring the level of existing homes available for sale back into line with demand, which is now nearly flat, said experts, noting that the correction in the market isn't unusual following a boom in construction and a spike in speculative real estate investment. This correction, painful as it may be will help to restore the values of homes in the long run, market watchers say.
CUNA's Schenck also gave CNNMoney.com a variation on the negative theme. "It's not surprising, but it's certainly not good news," said Schenk. "We may be near the bottom. But the trouble is we're likely to stay at or near the bottom for a while. It's going to take us six to nine months to claw our way out of this situation, at least."
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