INSTANT VIEW: Pending home sales sank in May
NEW YORK (Reuters) - Pending sales of previously owned U.S. homes plummeted by 4.7 percent in May, far more than expected and a sign of more trouble ahead for the beleaguered housing market, a real estate trade group report showed on Tuesday.
U.S. wholesale inventories rose 0.8 percent in May, just slightly more than expected, but a measure of how long it would take to sell current stocks fell to a record low on strong sales of apparel and petroleum, a Commerce Department report showed on Tuesday.
KEY POINTS: * Economists polled ahead of the report had been expecting to see a 2.8 percent decrease in the National Association of Realtors index after a 7.1 percent surge in April, which previously had been reported as a 6.3 percent gain. * "The overall decline in contract signings suggests we are not out of the woods by any means," said Lawrence Yun, chief economist at the real estate trade group. * Compared to a year ago, pending sales, which are based on contracts signed in May and seen as a key barometer of future home sales activity, were down 14 percent.
COMMENTS:
JOSH STILES, BOND STRATEGIST, IDEAGLOBAL, NEW YORK:
"Pending home sales were weaker than we had expected and yet we were pretty pessimistic about the prospects for housing and the economy, so it doesn't really throw us for a loop. The Treasury market is focused on a lot of other things, including Fannie and Freddie. Treasuries today are still trying to sort that out."
MICHELLE MEYER, ECONOMIST, LEHMAN BROTHERS, NEW YORK:
PENDING HOME SALES: "It's just a reversal in activity from the prior month. Housing conditions are still challenging and mortgage rates actually rose in May."
"Home sales will probably fall through the summer and a bottom will reach about September and we'll bounce around there."
DAVID SLOAN, ECONOMIST, 4CAST LTD, NEW YORK:
"A fall was to be expected after the sharp rise of last month. This fall was a little sharper than expected though. There was an upward revision to the previous month although even the net was a little weaker than expected. It seems to be consistent with a trend that isn't really going anywhere, the downtrend seems to be finding a bit of a base but we don't seem to be having any recovery. If you look at the last few months the pending home sales trend looks fairly flat."
DAVID WATT, CURRENCY STRATEGIST, RBC CAPITAL MARKETS, TORONTO:
"The U.S. housing market is still not on the verge of a recovery. It is going to continue to be a headwind to consumer spending. There is a low threshold for good news for the U.S. dollar, this is not good news."
MARKET REACTIONS: BONDS: U.S. Treasuries were little changed CURRENCIES: U.S. dollar trims gains versus the yen STOCKS: Dow and S&P drop
