US April pending home sales rise as prices slide

WASHINGTON - Pending sales of previously owned U.S. homes rose in April to the highest level in six months as foreclosed properties flooded the market and drove prices sharply lower, a real estate trade group's report on Monday showed.

By (Reuters)

Published: Mon 9 Jun 2008, 11:59 PM

Last updated: Sun 5 Apr 2015, 1:07 PM

But conditions in the labor market deteriorated in May and will continue to do so, a separate report from the New York-based Conference Board on Monday showed.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in April and seen as a key barometer of future housing activity, increased 6.3 percent to 88.2 from an unrevised 83.0 in March. Despite the increase, sales were 13.1 percent below year-ago levels.

"Bargain hunters have entered the market en masse, especially in areas that have seen double-digit price declines," said Lawrence Yun, the National Association of Realtors' chief economist. Regions of the country that have seen sharp price declines, such as the West, are now seeing a sales recovery, he added.

Economists polled by Reuters before the report were expecting pending home sales to decline 0.5 percent.

U.S. Treasury debt prices fell on Monday after the surprising jump in April pending home sales, while the Dow Jones industrial average and the Standard & Poor's 500 Index were up, helped by a pullback in oil prices of nearly $3 a barrel.

Faster foreclosures

"We are seeing an acceleration in foreclosures. As foreclosures have taken off, they put pressure on prices. Banks have become more aggressive with sales on homes they have foreclosed," said Christopher Low, chief economist at FTN Financial in New York.

In the West, the biggest trouble spot hit by the subprime mortgage crisis, pending sales rose 8.3 percent in April and they were up 4 percent from a year ago. Pending sales rose also in the Midwest and the South, but they were down in the Northeast.

FTN's Low said the pickup in pending home sales could be a sign that the housing market could soon be stabilizing.

"Sales will stabilize in the next few months and that will set the stage for inventories turning to normal sometime next year and maybe even for prices to appreciate a bit," he said.

"For now, prices will continue to fall. There is still an inventory overhang that will take 18 months to work through. The end game of the housing bust is near."

The median home price fell 8 percent in April from a year earlier, according to a report from the National Association of Realtors last month, which was the second-largest price decline on record.

Some economists said the unexpected rise in pending home sales could be the result of statistical reporting issues being disrupted from an earlier-than-usual Easter holiday week.

"The exceptionally early Easter meant that all the holiday disruption was in March, so April had more selling days than usual," said High Frequency Economics' chief economist Ian Shepherdson, who expects the May data will reflect a sharp drop.

Labor market deteriorates

The Conference Board's latest report painted a bleak picture for the U.S. labor market, showing that conditions deteriorated to the worst in 3-1/2 years.

The Employment Trends Index fell in May to 113.7 from 114.3 in April, with the May reading the lowest since December 2004, the Conference Board said. The index is down 6 percent since July 2007, it said. The index's all-time peak was 126.5 in July 2000.

"We forecast further softening in the labor market, a moderate rise in unemployment, and weaker wage growth over the next several quarters," said Gad Levanon, senior economist at the Conference Board, a private research group.

"Employers will find it easier to recruit and hire, and will be looking at slower growth in compensation costs. Workers will find it harder to get a job, a raise or a bonus -- all of which will further rein in consumer spending."

However, the Conference Board said it did not anticipate job losses on the scale of those seen in previous downturns because employers have kept their payrolls leaner.

The Conference Board's latest data came after the Labor Department on Friday reported that the U.S. unemployment rate surged to 5.5 percent in May, its highest in more than 3-1/2 years, as the sluggish economy lost jobs for the fifth straight month. In April, the nation's jobless rate was 5 percent.

The jump of 0.5 percent in the monthly jobless rate was the biggest in 22 years and renewed fears that the U.S. economy was at growing risk of sliding into recession.

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