New-Home Sales in U.S. Probably Rose to Second-Lowest on Record
July 23 (Bloomberg) -- Don Hays, founder of Hays Advisory Group, discusses his view of the European bank stress tests, and the prospects of a double-dip recession. Hays speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)
Sales of new U.S. homes rose in June to the second-lowest level on record, indicating the industry that sparked the recession is having difficulty sustaining a recovery following the end of a government tax credit, economists said before a report today.
Purchases climbed 3.7 percent to a 311,000 annual pace last month, according to the median estimate of 60 economists surveyed by Bloomberg News. The rate would be second only to May’s 300,000 as the lowest since data began in 1963.
“The housing market is languishing at very low levels,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “You’re seeing the effects of the tax credit fade, revealing the underlying weakness in sales.”
A lack of jobs is shaking Americans’ confidence in the recovery, overshadowing a drop in mortgage rates that has made home buying more affordable. Mounting foreclosures are also swelling the inventory of previously owned houses on the market, prompting builders to cut back and indicating declines in construction will restrain the economic recovery.
The Commerce Department’s report is due at 10 a.m. in Washington. Estimates ranged from 290,000 to 360,000.
To become eligible for a federal incentive worth up to $8,000, buyers had to sign contracts by April 30 and close deals by the end of last month. The surge in demand prior to the April deadline prompted the government this month to extend the closing deadline until Sept. 30 to ensure buyers had enough time to complete transactions.
Credit’s Influence
Sales of new houses, which are calculated when a contract is signed, plunged an unprecedented 33 percent in May following the expiration of the credit after reaching an almost two-year high the prior month, a Commerce Department’s report showed last month.
Purchases of previously owned homes, which are tabulated when a contract closes, fell a less-than-forecast 5.1 percent in June, sustained by a backlog of deals waiting to settle, figures from the National Association of Realtors showed last week.
Builder shares have dropped this year as the housing outlook dimmed. The Standard & Poor’s Supercomposite Homebuilder Index, which includes Toll Brothers Inc. and Lennar Corp., has fallen 5.4 percent year-to-date, while the S&P 500 Index is down 1.1 percent.
With the deadline for signing a contract now past, it will be up to advances in the labor market to support home sales. Private U.S. companies added 83,000 jobs in June, fewer than economists had forecast, and initial claims for jobless benefits this month remain elevated.
Mounting Foreclosures
Another challenge to new home sales is the rising tide of foreclosures. 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.
NVR Inc., based in Reston, Virginia, said last week the original June 30 closing deadline to qualify for the tax incentive resulted in a “surge in settlement activity” in the second quarter, with closings jumping 63 percent from the same time a year earlier. New orders fell 6 percent in the second quarter to 2,559 units.
Homebuilders turned more pessimistic this month, with the National Association of Home Builders/Wells Fargo confidence index dropping to the lowest level since April 2009, according to data released last week.
Bloomberg Survey
===========================================
New Home New Home
Sales Sales
,000’s MOM%
===========================================
Date of Release 07/26 07/26
Observation Period June June
-------------------------------------------
Median 311 3.7%
Average 316 5.2%
High Forecast 360 20.0%
Low Forecast 290 -3.3%
Number of Participants 60 60
Previous 300 -32.7%
-------------------------------------------
Action Economics 320 6.7%
Aletti Gestielle SGR 320 6.7%
Ameriprise Financial Inc 310 3.3%
Banesto 330 10.0%
Bank of Tokyo- Mitsubishi 320 6.7%
Barclays Capital 315 5.0%
BMO Capital Markets 310 3.3%
BNP Paribas 310 3.3%
Briefing.com 295 -1.7%
Capital Economics 290 -3.3%
CIBC World Markets 315 5.0%
Citi 340 13.3%
ClearView Economics 320 6.7%
Commerzbank AG 310 3.3%
Credit Agricole CIB 330 10.0%
Credit Suisse 290 -3.3%
DekaBank 310 3.3%
Deutsche Bank Securities 330 10.0%
DZ Bank 315 5.0%
Exane 305 1.7%
First Trust Advisors 325 8.3%
Fortis 306 2.0%
Helaba 325 8.3%
HSBC Markets 290 -3.3%
Hugh Johnson Advisors 320 6.7%
IDEAglobal 345 15.0%
IHS Global Insight 309 3.0%
Informa Global Markets 320 6.7%
ING Financial Markets 310 3.3%
Intesa-SanPaulo 330 10.0%
J.P. Morgan Chase 310 3.3%
Janney Montgomery Scott L 310 3.3%
Jefferies & Co. 300 0.0%
Landesbank Berlin 350 16.7%
Landesbank BW 315 5.0%
Maria Fiorini Ramirez Inc 300 0.0%
MFC Global Investment Man 305 1.7%
Moody’s Economy.com 312 4.0%
Morgan Keegan & Co. 305 1.7%
Morgan Stanley & Co. 325 8.3%
Natixis 305 1.7%
Nomura Securities Intl. 300 0.0%
Pierpont Securities LLC 360 20.0%
Raymond James 310 3.3%
RBC Capital Markets 320 6.7%
Ried, Thunberg & Co. 300 0.0%
Scotia Capital 310 3.3%
Societe Generale 310 3.3%
Standard Chartered 300 0.0%
State Street Global Marke 295 -1.7%
Stone & McCarthy Research 350 16.7%
TD Securities 335 11.7%
Thomson Reuters/IFR 335 11.7%
UniCredit Research 325 8.3%
University of Maryland 340 13.3%
Wells Fargo & Co. 290 -3.3%
WestLB AG 320 6.7%
Westpac Banking Co. 300 0.0%
Woodley Park Research 342 14.0%
Wrightson Associates 300 0.0%
===========================================
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
Rate These Stories
Rate this Page