WRAPUP 3-US pending home sales rise, but recovery far away

Wed Jun 29, 2011 2:43pm EDT

Related Topics

  
 * Pending home sales rise 8.2 pct in May
 * Demand for home purchase loans drops to 4-month low
 * Oversupply of homes hampering recovery
 (Adds details, Obama comments on economy)
 By Lucia Mutikani
 WASHINGTON, June 29 (Reuters) - Pending sales of existing
U.S. homes rebounded from a seven-month low in May but demand
for mortgages sank last week and the market is still struggling
under the weight of a glut of unsold properties.
 The National Association of Realtors said on Wednesday its
Pending Home Sales Index increased 8.2 percent to 88.8. Pending
homes sales lead actual sales of homes by a month or two.
 The rise in contracts was merely a correction after an 11.3
percent fall in April and the market will continue to bounce
along the bottom, economists said.
 That subdued outlook for a sector, which is helping to
constrain economic growth, was illustrated by a Mortgage
Bankers Association report showing applications for loans to
buy homes dropped 3 percent last week to a four-month low.
 "Although today's number could bring some cheer to
investors who are on the prowl for good news, the fact of the
matter is that the housing sector is still a long way from a
meaningful recovery," said Peter Buchanan, a senior economist
at CIBC World Markets in Toronto.
 While the rise in contracts suggested a bounce back in home
sales in June, economists cautioned against expecting a strong
increase as many planned deals get canceled.
 Demand for loans to buy a home has been modest so far this
month. Existing home sales fell 3.8 percent in May.
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INSTANT VIEW - US pending home sales [ID:nN1E75S0JN]
Graphic - pending home sales: r.reuters.com/fun42s
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 WEAK HOUSING HURTING ECONOMY
 Investors on Wall Street cheered the rise in pending home
sales, which beat economists' expectations for a 3.8 percent
gain, and bought stocks for a third straight day.
 Sentiment was also buoyed by the Greek parliament's
approval of austerity measures, an important step in the
country's bid to gain access to international funding to avoid
default. Prices for U.S. government debt fell and the dollar
was down against a basket of currencies.
 The housing market is grappling with an oversupply of
homes, which is keeping prices subdued, and economists do not
see a recovery any time soon.
 According to the NAR, there were 3.72 million used homes on
the market in May, excluding the so-called shadow inventory of
homes which are at risk of being foreclosed upon or have been
seized by lenders.
 The housing market collapse helped to push the U.S. economy
into its worst recession since the 1930s. The sluggish economic
recovery has been marked by a 9.1 percent unemployment rate and
on Wednesday, President Barack Obama called for new job
creation measures.
 "It makes perfect sense for us to take a look at, can we
extend the payroll tax, for example, an additional year, and
other tax breaks for business investment that could make a big
difference in terms of creating more jobs right now," Obama
told a White House news conference. [ID:nN1E75S0UN]
 Economists are cautiously optimistic that home sales will
gradually improve later this year and chip away at the huge
inventory. Data on Tuesday showed a moderation in the pace of
decline in single-family home prices in April.
 "What is emerging is that we have hit some bottom level of
activity and that's a good thing," said Steve Blitz, a senior
economist at ITG Investment Research in New York.
 "When you take that and marry it to the fact that you are
not getting much new home construction, it means you are
selling out of inventory of existing homes ... and you start to
get new home construction. The industry is slowly moving in the
right direction."
  A slightly hopeful note was also sounded by KB Home, the
fifth-biggest U.S. homebuilder, which said net orders for new
homes fell 11 percent in the second quarter, compared with the
same period of 2010 but jumped 53 percent from the first three
months of the year.
 "Although a broad-based housing recovery remains stalled,
it appears that the worst of the crisis is behind the
homebuilding industry as select markets for new homes are
showing signs of stability," said chief executive officer
Jeffrey Mezger.
 (Editing by Andrea Ricci)



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