By Bob Willis Jan. 5 (Bloomberg) -- The number of contracts to buy previously owned U.S. homes probably fell in November for the first time in 10 months as Americans waited for a tax credit to be extended, economists said before a report today. The index of signed purchase agreements, or pending home sales, dropped 2 percent after October’s 3.7 percent increase, according to the median estimate in a Bloomberg News survey of 35 economists before today’s release from the National Association of Realtors. Factory orders rose for a third straight month in November, a separate report from the Commerce Department may show. The incentive for first-time homebuyers, originally scheduled to expire at the end of the month and subsequently extended through April and broadened, is stabilizing sales. The credit and cheaper properties are helping sustain the recovery in housing that’s emerged from the worst slump since the 1930s. “Buyers wouldn’t have expected to close in time to take advantage of the credit,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Sales will improve again as we move through the first part of the year, as buyers take advantage of the tax credit and improved affordability. The underlying trend is one of improvement.” The National Association of Realtors is due to report the figures at 10 a.m. in Washington today. Estimates range from a drop of 12 percent to a 3.9 percent increase. The Commerce Department report at the same time may show orders placed with U.S. factories rose 0.5 percent in November after a 0.6 percent rise, according to the median estimate of 58 economists surveyed by Bloomberg. Leading Indicator Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The Realtors group started publishing the index in March 2005, and data go back to January 2001. Transactions had to close by Nov. 30 for buyers to qualify for the tax credit, which explains why resales continued to rise through November. The extension allows closings to occur by the end of June as long as contracts are signed by the end of April. Sales of existing homes in November rose 7.4 percent to a 6.54 million annual rate, the highest level in almost three years, the National Association of Realtors said on Dec. 22. Foreclosures accounted for 33 percent of all sales, the group said. President Barack Obama on Nov. 6 extended the $8,000 first- time buyer credit and expanded it to include current homeowners in a bid to boost demand. Still, the measure may have pulled sales forward and could result in fewer purchases in coming months. Home Prices The recession has helped make homes more affordable. The S&P/Case-Shiller index of average home prices in 20 U.S. cities was down 29 percent in October from its peak in July 2006. The measure fell 7.3 percent from October 2008. Federal Reserve officials are doing their part to sustain the housing rebound by pledging to keep their benchmark interest rate near zero for an “extended period,” according to their latest policy statement. Even so, mortgage rates have begun rising. The average rate on a 30-year fixed home loans rose to 5.14 percent for the week ended Dec. 31, the fourth consecutive gain after reaching a record low of 4.71 percent in the week ended Dec. 3, according to mortgage finance company Freddie Mac. Builders are still struggling even as many forecast a rebound this year. Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, said Dec. 16 its fourth-quarter loss narrowed as more buyers signed purchase contracts. ‘Year of Transition’ “2010 will be a year of transition for us,” Chief Executive Officer Ara Hovnanian said on a conference call. “We have started down a path that we believe will eventually return us to profitability.” Stocks of homebuilders surged last year as the economy recovered from the worst recession in seven decades. The Standard & Poor’s Homebuilder Supercomposite Index gained 66 percent from March 9 through the end of 2009. The S&P 500 Index rose 65 percent since reaching a 12-year low that day. An absence of job gains remains a hurdle for housing. The economy has lost 7.2 million jobs since the recession began in December 2007. The unemployment rate may exceed 10 percent through the first half of 2010, a Bloomberg survey showed. Bloomberg Survey ================================================= Pending Factory Homes Orders MOM% MOM% ================================================= Date of Release 01/05 01/05 Observation Period Nov. Nov. ------------------------------------------------- Median -2.0% 0.5% Average -2.9% 0.5% High Forecast 3.9% 1.5% Low Forecast -12.0% -1.0% Number of Participants 35 58 Previous 3.7% 0.6% ------------------------------------------------- 4CAST Ltd. -3.0% 0.9% Action Economics 0.2% 1.0% Aletti Gestielle SGR --- 0.9% Ameriprise Financial Inc -4.0% 0.5% Bank of Tokyo- Mitsubishi --- 0.3% Barclays Capital -5.0% 1.3% BBVA 3.9% 0.8% BMO Capital Markets -2.0% 0.5% BNP Paribas --- -0.4% BofA Merrill Lynch Resear --- 0.7% Briefing.com 2.0% 0.1% Capital Economics -10.0% 0.5% CIBC World Markets --- 0.8% Citi --- 0.2% ClearView Economics -1.0% 0.8% Commerzbank AG 1.0% 0.6% Credit Suisse --- 0.5% Daiwa Securities America --- 0.5% DekaBank -3.0% 0.5% Deutsche Bank Securities 2.5% 0.8% Deutsche Postbank AG --- 0.4% First Trust Advisors --- 0.4% Fortis 0.0% 0.5% Goldman, Sachs & Co. --- 0.0% Helaba --- 0.2% Herrmann Forecasting -0.8% 0.6% High Frequency Economics -10.0% --- HSBC Markets 1.0% 0.4% IDEAglobal -3.0% 0.5% Informa Global Markets -1.5% 0.0% ING Financial Markets -2.0% 0.5% Insight Economics 1.0% 0.3% J.P. Morgan Chase -4.0% 1.1% Janney Montgomery Scott L -4.0% 0.5% Jefferies & Co. --- 0.5% Johnson Illington Advisor --- 1.0% Landesbank Berlin --- 0.7% Maria Fiorini Ramirez Inc -10.0% 0.5% MF Global -5.0% 1.2% MFC Global Investment Man --- 0.3% Mizuho Securities -5.0% 0.3% Moody’s Economy.com -3.5% 1.5% Morgan Keegan & Co. --- 0.5% Nomura Securities Intl. --- 0.5% Nord/LB --- 0.1% PineBridge Investments 0.5% 0.2% PNC Bank --- 0.7% Raiffeisen Zentralbank -6.0% -1.0% RBS Securities Inc. --- 0.4% Ried, Thunberg & Co. -12.0% --- Schneider Foreign Exchang -3.1% 0.8% Societe Generale --- 0.8% Stone & McCarthy Research --- 0.7% TD Securities -2.0% 0.5% Tullett Prebon --- 0.5% UBS -2.0% 1.5% University of Maryland 0.4% 0.4% Wells Fargo & Co. --- 0.6% Woodley Park Research -0.2% 0.5% Wrightson Associates -12.0% 0.5% ================================================= To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.

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