Housing slump seen moderating
The U.S. housing market is showing signs of stabilizing after its biggest decline in 15 years, economists said in advance of two reports on home sales this week.
New-home purchases increased 0.5% in November to an annualized rate of 1.015 million, according to the median estimate in a Bloomberg News survey of economists before the Commerce Department’s report Wednesday.
The National Assn. of Realtors is expected to report the next day that sales of previously owned homes fell about 0.6% in November.
The figures, although not yet pointing to recovery in the housing market, show that builder incentives, cheaper homes and lower mortgage rates are keeping the real estate slump from deepening. A housing market on firmer footing may help reduce the risk of an extended slowdown in economic growth.
“The pace of decline has really eased up a lot,” said Stephen Stanley, chief economist at RBS Greenwich Capital. The reports will be among “a handful of straws in the wind that say we may see a halt in housing declines soon.”
Data last week showed that the economy was weathering the housing downturn. Consumer spending, which accounts for two-thirds of the economy, rose 0.5% in November, the most in four months, and incomes increased 0.3%, the Commerce Department reported Friday.
Job and income gains helped power spending at the start of the fourth quarter, supporting the Federal Reserve’s forecast of moderate economic growth.
“All of our payments data indicate that the consumer continues to spend,” G. Kennedy Thompson, chief executive of Wachovia Corp., said last week. “The key to the consumer is not what happens in housing but what happens in unemployment, and we don’t see the unemployment rate rising substantially.”
The jobless rate was 4.5% in November, near a five-year low of 4.4%. Thompson said companies were less likely to reduce their workforces because “corporate profits are strong and corporations are spending right now.”
The expected rise in sales of new homes would follow a 3.2% decrease a month earlier. New housing accounts for about 15% of the market.
Economists consider new-home purchases a more timely barometer of the market because they are recorded when a contract is signed. Most sales of previously owned homes are recorded when a contract closes and reflect buying decisions made months earlier.
From Bloomberg News
The week ahead
Today
* Christmas Day holiday observed. Most financial markets around the world are closed.
Tuesday
* Treasury bill auction.
* Standard & Poor’s releases its housing prices index.
Wednesday
* Commerce Department reports on November new-home sales.
* ShopperTrak RCT Corp. releases holiday sales figures.
Thursday
* Conference Board reports its monthly consumer confidence index.
* Labor Department reports on weekly jobless claims.
* National Assn. of Realtors reports on previously owned home sales for November.
* Freddie Mac reports on mortgage rates.
Friday
* Last trading day of the year.
