In January, pending sales for previously owned homes have dropped unexpectedly. The extension of the tax credit is not sparking sales in the real estate market.

 According to the National Association of Realtors, contracts for previously owned homes have dropped 7.6percent after a 0.8 percent increase in December. In November, the measure slumped a record 13.7 percent. Snowstorms in February probably limited contract signings and sales that month as well, the group said.

The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping boost sales last year. A lack of jobs and mounting foreclosures have depressed confidence, indicating housing will take time to rebound.

The original deadline for the credit “clearly pulled demand forward and there has been a substantial payback,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The housing recovery is going to be very, very slow.”

Stocks fell after the report and separate figures that showed a pause in demand for business equipment. Factory orders rose 1.7 percent in January, boosted by a surge in commercial aircraft bookings, according to Commerce Department data that also showed less demand for computers and machinery.

The Standard & Poor’s 500 Index declined 0.1 percent to 1,117.72 at 10:38 a.m. in New York. The yield on the 10-year Treasury note decreased two basis points to 3.6 percent. A basis point is 0.01 percentage point.

Economists’ Forecasts

Economists forecast the gauge would increase 1 percent in January after a previously reported 1 percent gain in December, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from a drop of 4.2 percent to an increase of 4 percent.

“The abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February,” Lawrence Yun, the group’s chief economist, said in a statement. “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June.”

Other reports earlier today showed initial jobless claims fell from a three-month high, while productivity increased in the fourth quarter. First-time claims for unemployment insurance dropped 29,000 last week to 469,000, the Labor Department said.

Productivity Surge

Productivity, a measure of employee output per hour, rose at a 6.9 percent annual rate in the final three months of last year, the Labor Department also said. Labor costs dropped 5.9 percent, more than anticipated.

The Realtors’ report showed declines in pending sales in all four regions, led by a 13 percent slump in the West. Contract signings fell 8.9 percent in the Midwest, 8.7 percent in the Northeast and 2.1 percent in the South.

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 pending sales data go back to January 2001, and the group began publishing the index in March 2005.

Reports last week showed the housing market may be faltering. Sales of previously owned homes unexpectedly dropped 7.2 percent in January after a record decline a month earlier, according to Realtors group’s report Feb. 26. New-home sales slumped to an all-time low, the Commerce Department said Feb. 24.

Credit Extension

President Barack Obama and Congress extended the first-time buyer credit in early November to cover deals signed by April 30 and closed by June 30, and expanded it to include some current homeowners. Even so, some economists said the original measure pulled sales forward, restraining demand in subsequent months.

Among other concerns for the housing outlook, the Federal Reserve said it plans to end later this month a program to purchase mortgage-backed securities, which helped contain borrowing costs.

The plan helped push the rate on a 30-year fixed mortgage down to 4.71 percent in early December, the lowest level since Freddie Mac started keeping weekly records in 1972. The rate has hovered around 5 percent since then.

Foreclosures pose another threat. Foreclosure filings rose 15 percent in January compared with a year earlier and exceeded 300,000 for the 11th straight month, RealtyTrac Inc. said Feb. 11.

1980s and 1990s

The housing market will “follow a similar pattern” to recovery as it did in the late 1980s and early 1990s, which both took “several years,” Toll Brothers Inc. Chief Executive Officer Robert Toll said in a statement Feb. 24.

The company, the largest U.S. luxury-home builder, said its orders almost doubled in the first quarter compared with a year earlier. It projected it will sell between 2,100 and 2,750 homes in fiscal 2010 at an average price of $540,000 to $560,000 each.

Source: Bloomberg