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Purchases of U.S. Existing Homes Probably Dropped as Credit's Effect Waned
Sales of U.S. previously owned homes probably fell in June for a second month, adding to evidence the market will slump as the effects of a government tax credit fade, economists said before a report today.
Purchases dropped 9.9 percent from May to a 5.1 million annual rate, according to the median of 74 forecasts in a Bloomberg News survey. Other reports may show the outlook for economic growth cooled and claims for jobless benefits rose.
A government incentive of up to $8,000 boosted sales earlier in the year, releasing pent-up demand and indicating additional gains will be slow to develop. Increasing foreclosures are swelling the number of unsold homes, putting pressure on prices and keeping buyers on the sidelines as unemployment hovers near 10 percent and the economy cools.
“There is some genuine slowdown coming through,” said Rob Carnell, chief international economist at ING Financial Markets in London. “We’re heading back to pre-rebate territory. It does appear we’re in a downtrend.”
The report from the National Association of Realtors is due at 10 a.m. in Washington. Estimates in the Bloomberg News survey ranged from 4.25 million to 6.2 million.
Like other housing data, sales of existing homes have been whipsawed by the timing of the tax credit. After surging to a two-and-a-half year high of 6.49 million in November, the month of the credit’s initial expiration, they dropped for the next three months. Demand then recovered in March and April, which was the deadline for signing contracts, only to slip again the following month.
Credit’s Influence
The June 30 deadline to close deals, which is when existing home sales are tabulated, was extended to the end of September to ensure prospective buyers had enough time to complete transactions. The majority of those closings will have occurred by last month, so the extension will not markedly lift demand, said Zach Pandl, an economist at Nomura Securities International Inc. in New York.
Housing’s inability to maintain a rebound is one reason the economic recovery is not gaining speed. Reports earlier this week showed housing starts fell in June to the lowest level since October, and homebuilder sentiment dropped to a 15-month low in July.
The Conference Board’s index of leading economic indicators, also due at 10:00 a.m., probably fell 0.3 percent in June after rising 0.4 percent in May, according to the survey median. A decline would be the first since March 2009. The gauge measures the outlook for the next three to six months.
More Claims
A report from the Labor Department at 8:30 a.m. may show firings remain elevated. Initial jobless claims rose to 445,000 last week from 429,000 the prior week, the survey showed.
Private payrolls rose a less-than-forecast 83,000 in June and total jobs fell by 125,000, the first decline this year, the Labor Department reported this month. Economists surveyed by Bloomberg forecast unemployment will end the year at 9.5 percent, unchanged from the rate in June.
Foreclosures and short-sales are boosting the so-called shadow inventory, and competing with owners trying to sell properties. Home seizures jumped 38 percent in the second quarter from a year earlier, RealtyTrac Inc. said last week, putting lenders on pace to claim more than 1 million properties this year.
The Standard & Poor’s Supercomposite Homebuilder Index, which includes Toll Brothers Inc. and Lennar Corp., has dropped 10.3 percent year-to-date, while the S&P 500 Index is down 4.1 percent.
Lennar Sales
Sales at Miami-based Lennar, the third-biggest U.S. homebuilder by revenue, were running 20 percent to 25 percent lower last month than a year earlier as the expiration of the tax credit sapped demand, Chief Executive Officer Stuart Miller said June 24.
“The new-home market and housing in general still face serious headwinds from current economic and legislative conditions,” Miller said on a conference call with investors. “The prospect of additional delinquencies ahead continues to moderate this recovery as shadow inventory continues to be absorbed.”
Bloomberg Survey
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Initial LEI Exist Exist
Claims Homes Homes
,000’s MOM% Mlns MOM%
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Date of Release 07/22 07/22 07/22 07/22
Observation Period 17-Jul June June June
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Median 445 -0.3% 5.10 -9.9%
Average 446 -0.3% 5.13 -9.4%
High Forecast 460 0.0% 6.20 9.5%
Low Forecast 420 -0.5% 4.25 -24.9%
Number of Participants 42 57 74 74
Previous 429 0.4% 5.66 -2.2%
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4CAST Ltd. 455 -0.5% 5.20 -8.1%
Action Economics 455 -0.2% 5.00 -11.7%
Aletti Gestielle SGR 440 -0.2% 5.40 -4.6%
Ameriprise Financial Inc --- -0.5% 5.00 -11.7%
Banesto --- -0.4% 5.30 -6.4%
Bank of Tokyo- Mitsubishi 449 -0.3% 4.81 -15.0%
Bantleon Bank AG --- -0.4% 5.40 -4.6%
Barclays Capital 460 -0.2% 5.40 -4.6%
Bayerische Landesbank --- -0.3% --- ---
BBVA 444 -0.4% 5.39 -4.8%
BMO Capital Markets 450 -0.3% 5.09 -10.1%
BNP Paribas 440 -0.2% 5.00 -11.7%
BofA Merrill Lynch Research 445 -0.3% 5.10 -9.9%
Briefing.com 440 -0.4% 5.40 -4.6%
Capital Economics --- -0.5% 4.80 -15.2%
CIBC World Markets --- --- 5.38 -5.0%
Citi 430 -0.1% 5.50 -2.8%
ClearView Economics --- --- 5.50 -2.8%
Commerzbank AG 420 -0.2% 5.00 -11.7%
Credit Agricole CIB --- --- 5.26 -7.1%
Credit Suisse 435 -0.5% 6.20 9.5%
Danske Bank --- --- 4.90 -13.4%
DekaBank --- -0.2% 5.00 -11.7%
Desjardins Group 445 -0.3% 4.90 -13.4%
Deutsche Bank Securities --- -0.4% 4.81 -15.0%
Deutsche Postbank AG --- -0.2% --- ---
DZ Bank --- -0.4% 5.10 -9.9%
First Trust Advisors 433 -0.2% 5.26 -7.1%
FTN Financial --- --- 4.65 -17.8%
Goldman, Sachs & Co. --- -0.5% 5.21 -8.0%
Helaba 455 -0.2% 5.30 -6.4%
High Frequency Economics 460 -0.4% 5.00 -11.7%
HSBC Markets 440 -0.2% 5.00 -11.7%
Hugh Johnson Advisors --- -0.3% 5.30 -6.4%
IDEAglobal 445 -0.2% 5.35 -5.5%
IHS Global Insight --- --- 5.09 -10.1%
Informa Global Markets --- -0.5% 5.40 -4.6%
ING Financial Markets --- -0.3% 5.00 -11.7%
Insight Economics 450 -0.4% 5.00 -11.7%
Intesa-SanPaulo --- --- 5.20 -8.1%
J.P. Morgan Chase 450 --- 5.30 -6.4%
Janney Montgomery Scott --- -0.4% 5.08 -10.3%
Jefferies & Co. 445 -0.3% 5.00 -11.7%
Landesbank Berlin 450 -0.4% 4.25 -24.9%
Landesbank BW --- -0.3% 5.10 -9.9%
Maria Fiorini Ramirez 445 -0.3% 5.80 2.5%
MF Global 455 -0.3% 4.80 -15.2%
MFC Global Investment 440 --- 5.40 -4.6%
Mizuho Securities 460 -0.4% 5.10 -10.0%
Moody’s Economy.com 445 -0.3% 4.81 -15.0%
Morgan Keegan & Co. --- 0.0% --- ---
Morgan Stanley & Co. --- -0.3% 5.20 -8.1%
National Bank Financial --- --- 5.00 -11.7%
Natixis --- --- 5.10 -9.9%
Nomura Securities Intl. --- --- 5.35 -5.5%
Pierpont Securities LLC 438 --- 5.20 -8.1%
PineBridge Investments --- -0.1% 4.93 -13.0%
PNC Bank --- -0.3% 5.25 -7.2%
Raiffeisen Zentralbank --- --- 4.80 -15.2%
Raymond James 440 -0.4% 5.25 -7.2%
RBC Capital Markets 457 --- 5.60 -1.1%
RBS Securities Inc. 460 --- 5.10 -9.9%
Ried, Thunberg & Co. 450 --- 5.40 -4.6%
Scotia Capital 440 -0.4% 5.15 -9.0%
Standard Chartered --- --- 5.10 -9.9%
State Street Global Markets 448 -0.3% 4.99 -11.8%
Stone & McCarthy Research 450 -0.3% 5.30 -6.4%
TD Securities 435 -0.4% 5.44 -3.9%
Thomson Reuters/IFR 445 -0.2% 4.81 -15.0%
UBS 450 -0.2% 5.20 -8.1%
UniCredit Research 445 -0.2% 4.50 -20.5%
University of Maryland 450 0.0% 4.80 -15.2%
Wells Fargo & Co. --- -0.1% 4.85 -14.3%
WestLB AG --- -0.2% 5.20 -8.1%
Westpac Banking Co. --- --- 4.81 -15.0%
Woodley Park Research --- 0.0% 4.67 -17.5%
Wrightson Associates 450 --- 5.40 -4.6%
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To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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