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Tuesday Feb 03, 2009

US property sector struggles as more jobs go

US property sector struggles as more jobs go

After holding fairly stable over the last year, the number of pending home sales (pre-registrations) in the US has recently declined in the face of job losses and an eroding economy, according to the National Association of Realtors (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November but not yet registered with deeds offices, fell by almost 4% to 82.3% from 85.7% in October.

It is currently 5.3% below the figure for November 2007 of 86.9%.

The current index is the lowest since the series began in 2001.

Lawrence Yun, National Association of Realtors chief economist, says a further weakening in the property market is inevitable.

"Mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November and December," he says.

Despite the impact of mortgage interest rates declining to near 50-year lows in December not yet being reflected in the current data, Yun says the future outlook will depend heavily on government stimulus.

"Only with a proper real estate focused stimulus measure will home sales rise by more than 10% to 5.5 million units in 2009, and begin to stabilise in many parts of the country.

"Stable home prices will, in turn, lessen foreclosure pressures and lay the foundations for a solid economic recovery as the nation's 75 million homeowners regain confidence," he says.

"There can't be an economic recovery in the US or any other country without a focus on housing," says Barak Geffen, executive director of Sotheby's International Realty South Africa, who recently returned from the US.

"It's crucial for the US Congress and the new administration to move quickly to remove any impediments to credit extension and to help home buyers get loans by offering them additional incentives to tap into today's historic low interest rates on mortgage bonds.

"Low interest rates mean little while the banks are not granting loans.

"Although the fundamentals behind the South African economy and property market differ from the US market as a result of stricter local lending criteria, only time will tell whether we have seen the bottom of this downturn or whether the South African property market will follow the lead of the US.

"The Reserve Bank may need to act fast to avoid further deterioration in the South African housing market by cutting interest rates," says Geffen.

Source- Sunday Argus- Property Section

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