Pending U.S. home sales fell to the lowest level on record in November, as the plummeting stock market and faltering economy caused buyers to delay their purchases, the National Association of Realtors said Tuesday.
The index, which tracks signed contracts to purchase existing homes, fell 4 percent to 82.3 from a downwardly revised reading of 85.7 in October. That was far worse than the reading of 88 that economists expected, according to Thomson Reuters.
Typically there is a one- to two-month lag between a contract and a done deal. So November's decline foreshadows bleak results for December's existing home sales numbers, set to be release Jan. 26.
Sales contracts fell around the U.S., but were weakest in the Northeast and Midwest.
Also, the Commerce Department reported today that orders to factories fell for a record fourth straight month in November, and analysts believe manufacturing will continue to suffer in coming months as the U.S. slogs through a recession entering its second year.
Orders declined by 4.6 percent in November, nearly double the 2.5 percent drop economists expected. Orders have been falling since August, including a 6 percent plunge in October, the biggest setback in eight years.
The weakness in November reflected a big drop in demand for commercial aircraft. Weakness also was seen in autos, primary metals such as steel, and defense communications equipment.
While investors expected the data to show further deterioration, they were hoping the pace of the declines would slow. The market is eager for signs that the U.S. recession will end this year.
One bright spot among the day's reports: the Institute for Supply Management said the U.S. services sector contracted at a slower pace last month. The trade group of purchasing executives said its services sector index rose to 40.6 in December from 37.3 in November. Wall Street economists had expected the index to slip slightly to 37.
In midmorning trading, the Dow Jones industrial average rose 44.29, or 0.49 percent, to 8,997.18, after rising as much as 122 points prior to the readings. The Standard & Poor's 500 index rose 4.89, or 0.53 percent, to 932.34, while the Nasdaq composite index advanced 12.40, or 0.76 percent, to 1,640.43.
Stimulus For Real Estate Urged
The Realtors' pending home sales index was down 5.3 percent from November 2007, and now sits at the lowest since in its eight-year history - beating the previous record low of 83 in March 2008.
An index reading of 100 is equal to the average level of sales activity in 2001, when the index started.
Lobbyists for the real estate industry are using the deteriorating housing market data to call on President-elect Barack Obama to devote attention to sinking home prices and sales - the genesis of the recession.
"A real estate-focused stimulus plan is urgently needed," Lawrence Yun, the trade group's chief economist, said in a statement.
The U.S. has been coping with the worst housing recession in decades, and many in the real estate, banking and mortgage industries are poring through each month's data for signs of a bottom, with no luck so far.
U.S. existing home sales plunged to a rate of 4.49 million in November, down 8.6 percent from October. When the final tally for 2008 is complete, it is likely to be the worst year for home sales in at least in a decade. Plus, with job losses mounting, there appears to be no quick turnaround this year.
Indeed, the contracting economy makes the timing of any recovery a moving target. Home sales are growing in foreclosure-plagued areas like Las Vegas and Los Angeles, but are still sinking in most of the country. The Realtors group estimates that 45 percent of existing home sales are now foreclosures and other distressed properties.
Yun, however, forecasts a modest increase in home sales for 2009. He projects sales will be up 6.6 percent, after plunging by around 13 percent in both 2007 and 2008. Prices are forecasts to remain relatively level with a median of $198,100 this year, up from $197,000 last year.
U.S. Factory Orders Drop More Than Expected In Nov.
The factory orders report showed that demand for durable goods, items expected to last three or more years, fell by 1.5 percent in November, even worse than the government's initial estimate two weeks ago that durable goods had fallen 1 percent.
Demand for nondurable goods, items such as food, paper and petroleum products, dropped by 7.4 percent in November following a 3.8 percent decline in October. The declines for nondurable goods reflect falling demand and a big drop in prices, particularly for energy products.
The declines in November were led by a 37.7 percent plunge in demand for commercial aircraft, an extremely volatile series. Boeing Co. has been seeking to resume normal operations following the interruptions caused by a strike last year.
Demand for autos slipped by 0.1 percent following an even larger 4.1 percent fall in October as automakers continue to struggle with the economic downturn.
Economists are concerned that the manufacturing sector is being hit not only by a recession in the United States but spreading weakness overseas which has pushed many of America's major trading partners into downturns and cut into domestic export sales.