US home sales stabalize

Once the U.S. housing market recovers – there are signs it has hit bottom – huge swaths of the economy, ranging from building products and home improvement retailers to banks carrying distressed mortgages, will get a huge boost.

WHAT ARE THE EXPECTATIONS?

Existing home sales in the United States, for which figures are to be released today, are forecast to be at an annual rate of 4.65 million in March, compared with 4.72 million in February, according to a survey of economists by Bloomberg. These figures suggest sales have been stabilizing.

There was also a glimmer of good news yesterday as U.S. house prices rose for a second successive month, with the hard-hit Pacific region leading the way, according to the Federal Housing Finance Agency (FHFA). House prices increased 0.7 per cent in February, and were up a restated 1 per cent in January.

Nevertheless, the U.S. housing market remains in bad shape, said Meny Grauman, a senior economist with CIBC World Markets Inc.

Inventory levels remain at 11 months of supply, compared withy a more normal five to six months, and unemployment is rising.

"It is safe to say that we are at least several months away from a recovery," he said.

Mr. Grauman prefers the S&P/Case-Shiller home price index, which he considers a better indicator of house prices.

"We are still seeing home prices in the U.S. falling and that trend has accelerated over the past few months."

The FHFA housing index excludes house prices with loans of more than $417,000 (recently increased to $729,750), which were above the mortgage amounts insured by Freddie Mac and Fannie Mae, the agencies from which the FHFA obtains its information, said David Guarino, a spokesman for S&P-Case Shiller.

The FHFA information also includes home prices with refinanced mortgages, which are not included in the S&P/Case-Shiller data, he said.

"The S&P/Case Shiller data is designed to represent the price path of typical existing single family homes," Mr. Guarino said.

"It's hard to read too much into any one-month change. None of the measures is perfect."

The S&P/Case Shiller data include more high-end housing, but it is also criticized because it is based on information from select cities where, in some cases, foreclosure rates have been high – driving house prices down, economists say.

(prepared by Allan Robinson/Globe and Mail)