Northeast Is Toughest Place in U.S. to Sell Homes (Update1) By Kathleen M. Howley
Jan. 8 (Bloomberg) -- The toughest place to sell a home in the U.S. in November was the Northeast.
An index measuring signed contracts for previously owned homes fell 13 percent in the region, the most of any area in the country, the National Association of Realtors said today in a report.
The index's drop in states including Massachusetts and Connecticut was triple other U.S. regions and demonstrates home sellers there are having to lower expectations as the real estate slump worsens. Nationally, the number of Americans signing contracts to buy previously owned homes fell 2.6 percent in November from October, according to the Realtors' Pending Home Sales Index.
``The continued decline in residential investment has heightened the risk of a more significant downturn in the overall economy,'' Federal Reserve Bank of Boston President Eric Rosengren said today in a speech in Hartford, Connecticut.
The Realtors report showed pending resales fell in three of four regions. In addition to the Northeast's 13 percent drop, the pending sales index decreased 4.1 percent in the Midwest and 2.1 percent in the West. The pending sales rose 2.3 percent in the South. The figures are seasonally adjusted.
Home prices in Massachusetts declined 2.3 percent in 2007's third quarter from the same period a year earlier, according to the Office of Federal Housing Enterprise Oversight. That made it the fourth-worst market in the country during the quarter, after Michigan, California and Nevada.
Rapid Fall?
At a Dec. 11 meeting of the central bank's Federal Open Market Committee, Rosengren voted against the panel's decision to lower the benchmark short-term interest rate by a quarter percentage point, voting in favor of a half-point cut.
The Boston Fed president said in today's speech that last year's home price declines have prompted widespread foreclosures, and added that a worsening in conditions may occur.
``Since prices have declined substantially even in a relatively benign economic environment, one cannot discount the possibility that they could fall more rapidly should economic performance not remain strong in 2008,'' Rosengren said.
U.S. home prices may fall 12 percent from their peak through 2010 as ``the toughest housing correction in our lifetimes'' drags on, Fannie Mae Chief Executive Officer Daniel Mudd said.
Dire Situation
The outlook for the economy hinges on ``whether we pull together and deliver a recovery sooner, or we wait and hope until later at the cost of time, money and human suffering,'' Mudd, who runs the largest U.S. mortgage-finance company, said in a speech to the U.S. Chamber of Commerce in Washington today.
If the market doesn't improve, it may force a career change for Eric Hanlon, a real estate agent in Easton, Massachusetts. Three of his colleagues already have left real estate for other jobs, he said.
Hanlon, 36, is looking forward to March for two reasons: his third child, a son, is due to be born, and the so-called ``spring selling season'' will be just around the corner.
If the market is going to recover this year, it should happen by then, he said. Traditionally, more than half of all U.S. home sales occur in the three months between April and June, according to Frank Nothaft, chief economist of Freddie Mac, the No. 2 U.S. mortgage buyer.
Tough Times
``I'm at the whim of the market,'' said Hanlon. ``If things don't turn around I'm going to have to start thinking about another job, with a five-year-old, a two-year-old, and a newborn to support.''
The National Association of Realtors' index of pending home sales fell to 87.6 in November, following a 3.7 percent gain in October that was larger than previously estimated, the group said today in Washington.
The Realtors association estimates 5.7 million homes will be sold in 2008, little changed from an estimated 5.65 million last year. Purchases of new homes will fall to 669,000 from 773,000.
Fannie Mae has a bleaker outlook. The mortgage buyer estimates 4.9 million previously owned homes will sell this year, a drop of 13 percent from 2007.
U.S. home prices probably will tumble 4.5 percent in 2008 and 2.6 percent in 2009, Fannie Mae economists Molly Boesel and David Kogut wrote in a Dec. 19 forecast. Last year, home prices fell 2.2 percent, they said.
``The large number of unsold homes on the market is putting downward pressure on house prices,'' the economists said in the report. ``This price weakness is likely to extend into 2009 until a combination of a projected rise in home sales and decline in unsold inventories leads to perhaps a modest gain in prices by 2010.''
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