WASHINGTON — Signs are emerging that the U.S. housing market's long slump is likely to continue through the summer, and might not recover for at least another year.
The latest report, the National Association of Realtors' pending home sales index, slipped by 4.7 percent in May to the third-lowest reading on record. The decline ”suggests we are not out of the woods by any means,“ said the trade group's chief economist Lawrence Yun.
The bad news came as the regulator for Fannie Mae and Freddie Mac tried to reassure investors that an accounting rule change wouldn't force the government-chartered mortgage finance companies to raise tens of billions in capital to offset losses.
Central Kentucky has largely been spared the worst of the housing crisis that has decimated home values in Florida, Southern California, Nevada and other areas that were booming. Nationally, economists are reluctant to say the worst is over.
”Even if housing market activity does manage to bottom out later this year, it is likely that any recovery would be exceedingly slow,“ Jeffrey Lacker, president of the Federal Reserve Bank of Richmond said in a speech in Washington.
While home sales are likely to fall to their lowest point late this year or early next year, any recovery is likely to be weak through at least 2010, said Mark Vitner, senior economist with Wachovia Corp.
Meanwhile, prices shouldn't hit bottom for another year at the earliest, Vitner said, since the housing market is glutted with unsold new homes and foreclosed properties.
Making matters worse, rates on 30-year mortgages have been above 6 percent since late May, leading to a steep decline in new applications.
The Realtors' seasonally adjusted index of pending sales for existing homes fell 4.7 percent to 84.7 from an upwardly revised April reading of 88.9. The index was 14 percent below year-ago levels. Sales are considered pending when the seller has accepted an offer, but the deal has not yet closed.
Pending sales fell around the United States, sinking the most in the South, and the least in the West.
Despite the negative numbers, ”the worst of the hemorrhaging is behind us“ and a modest recovery is likely to take shape next year, said Bernard Baumohl, managing director of the Economic Outlook Group.