Housing market jitters continue to draw attention

By Derek Kravitz
AP Real Estate Writer

WASHINGTON (AP) — Fewer Americans signed contracts to buy homes in January, the latest evidence that the housing market is struggling to rise above depressed levels.

The National Association of Realtors says its index of sales agreements for previously occupied homes fell 2.8 percent last month to a reading of 88.9, the second straight monthly decline.

The reading was higher than the 75.9 reading from June, the low point since the housing bust. But it’s below 100, which is considered a healthy level.

The last time it reached that point was in April, the final month people could qualify for a home-buying tax credit.

Sales of previously owned homes fell last year to the lowest level in 13 years.

Economists say it will be years before the housing market fully recovers. High unemployment, strict lending standards and a record number of foreclosures are deterring potential buyers, who fear home prices haven’t reached the bottom.

Contract signings of previously owned homes are usually a good indicator of where the housing market is heading.

That’s because there’s usually a one- to two-month lag between a sales contract and a completed deal.

Steven Wood, chief economist for Insight Economics, said the tax credits have pulled home sales on a “roller-coaster ride over the past two years” and that sales have not yet found a steady level.

Jennifer Lee, senior economist for BMO Capital Markets, said the dismal contract numbers in January is “clearly bad news” for the nation’s housing industry.

“And we can’t blame weather as three of the four regions saw a decline,” she said.

The Realtors group had reported a modest 2 percent increase in December, which would have marked the fifth such uptick in the previous six months.

But the trade association, which began tracking contract signings of homes in 2001, revised its figures to show that signings actually fell in December from November by nearly 3.2 percent.

The more than 5 percent swing has raised some concerns among analysts that the data provided by the Realtors’ group may have flaws.

It follows comments from CoreLogic, a private real-estate data firm in Santa Ana, California, that the Realtors annual numbers have been too high.

The Realtors have said they are reviewing their 2010 yearly estimate.

“Anytime you go from a sizable positive number to a sizable negative number, like it did in January, it gets people thinking,” said Mark Vitner, senior economist with Wells Fargo Securities. “Virtually every housing report in January was negative and this was one of the few positive reports we saw and now it looks like it was wrong.”

Paul Bishop, vice president of research at the Realtors association, said preliminary figures released by the trade group are revised each month to reflect changing market conditions.

“All economic data is revised at some point or another and that in and of itself is not unusual,” he said. “We rely on the latest information we have and as that information comes in, we’ll update our numbers.”

Putting a number on how many people signed contracts to buy homes is not an exact science. Between the time a potential homebuyer agrees to purchase a home and the paperwork is signed, financing can fall apart and buyers can pull out.

Following the housing bust, an increasing number of home deals have been scuttled after buyers have balked at lengthy wait periods for purchase agreements or appraisals or when lenders have demanded larger down payments.

But the changing numbers could have a big affect on how economists view data from the Realtors group.

It could also affect how companies that rely on those numbers, such as home improvement stores, use the reports for things like how many people to hire and where to expand.

Prices and sales of previously occupied homes have painted a grim picture of that portion of the housing market, which historically accounts for roughly 85 percent of home sales.

Housing prices in all but one of the 20 cities tracked by the Standard & Poor’s/Case Shiller index fell in December from November.

Eleven of the markets — stretching from Seattle to Miami — hit their lowest point since the housing bubble burst in 2006 and 2007.

Sales of previously occupied homes rose slightly last month.

But the seasonally adjusted annual pace of 5.36 million is still far below the 6 million homes a year needed to maintain a healthy market.