Home Prices in 20 U.S. Cities Probably Increased as Tax Credit Aided Sales

Home prices in 20 U.S. cities rose in May from a year earlier as a government tax credit temporarily underpinned sales, economists forecast a report to show today.

The S&P/Case-Shiller index of property values increased 3.9 percent from May 2009, according to the median of 26 projections in a Bloomberg News survey. Another report may show consumer confidence dropped in July to a five-month low.

A retreat in demand since the April 30 contract-signing deadline to be eligible for an incentive worth up to $8,000 signals home prices will slacken in coming months. Mounting foreclosures may add to the pressure on property values, pointing to decreases in home equity that will hurt consumer spending and economic growth.

“The federal homebuyers tax credit has been an important stimulus to demand and it’s unclear whether prices will remain stable once that stimulus is gone,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “When you look at fundamentals in the housing market they still look pretty poor. You have limited demand and a lot of supply.”

The home-price figures are due at 9 a.m. New York time. Estimates ranged from increases of 2.9 percent to 5.1 percent, after a 3.8 percent gain in the 12 months to April.

At 10 a.m., a report from the Conference Board, a New York- based research group, may show its consumer confidence index fell to 51 this month from 52.9 in June, according to the survey median. Estimates ranged from 46 to 55.5. The measure averaged 45 in 2009 and 98 during the expansion that ended in December 2007.

Monthly Changes

The Case-Shiller home-price gauge rose 0.2 percent in May from the prior month after climbing 0.4 percent in April, according to the survey median. The measure advanced from June 2009, the first increase in more than two years, through January, and retreated in February and March.

The year-over-year measure provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Sales of existing houses reached an almost three-year high in November, the month the government’s tax incentive was originally due to expire. Since the extension lapsed on April 30, demand has again retreated.

Builder shares rose yesterday after sales of new houses posted a bigger-than-projected rebound following an unprecedented slump in May. At a 330,000 annual pace, the level was still the second-lowest in figures going back to 1963.

Builder Shares

The Standard & Poor’s Supercomposite Homebuilder Index, which includes Toll Brothers Inc. and Lennar Corp., increased 2.9 percent yesterday. The gain brought it to the highest level since June 17.

With the April 30 deadline for signing a contract now past, it will be up to advances in the labor market to support home sales. Companies added 83,000 jobs in June, fewer than economists had forecast, and initial jobless claims signal firings remain elevated.

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. BY contracts, new orders fell six percent in the period.

                        Bloomberg Survey

==============================================================
                         Case Shil Case Shil Consumer Richmond
                           Monthly  Monthly     Conf      Fed
                              MOM%     YOY%    Index    Index
==============================================================

Date of Release              07/27    07/27    07/27    07/27
Observation Period             May      May     July     July
--------------------------------------------------------------
Median                        0.2%     3.9%     51.0       12
Average                       0.1%     3.9%     51.5       13
High Forecast                 0.5%     5.1%     55.5       20
Low Forecast                 -0.6%     2.9%     46.0        6
Number of Participants          19       26       73        6
Previous                      0.4%     3.8%     52.9       23
--------------------------------------------------------------
4CAST Ltd.                    ---      ---      48.5     ---
Action Economics              ---      ---      51.0     ---
Aletti Gestielle SGR          ---      ---      51.0     ---
Ameriprise Financial Inc      ---      ---      53.5        6
Banesto                       ---      3.8%     52.7     ---
Bank of Tokyo- Mitsubishi     ---      ---      46.3     ---
Barclays Capital              0.3%     4.4%     53.5     ---
Bayerische Landesbank         ---      ---      51.0     ---
BBVA                         -0.2%     3.1%     52.6     ---
BMO Capital Markets           ---      3.8%     50.0     ---
BNP Paribas                   ---      ---      51.0     ---
BofA Merrill Lynch Research   ---      3.3%     50.5     ---
Briefing.com                  ---      4.0%     51.0     ---
Capital Economics             0.3%     4.3%     50.0     ---
Citi                          ---      ---      52.0     ---
ClearView Economics           ---      ---      54.0     ---
Commerzbank AG                ---      4.0%     51.0     ---
Credit Agricole CIB           ---      ---      51.9     ---
Credit Suisse                 ---      ---      46.0     ---
Daiwa Securities America      ---      ---      50.0     ---
DekaBank                      ---      ---      50.0     ---
Desjardins Group              ---      3.9%     55.5     ---
Deutsche Bank Securities      0.3%     ---      54.0     ---
Deutsche Postbank AG          ---      ---      51.0     ---
DZ Bank                       ---      3.8%     49.9     ---
First Trust Advisors          ---      ---      48.4     ---
Fortis                        0.2%     ---      53.5     ---
Goldman, Sachs & Co.          ---      ---      50.0     ---
Helaba                        ---      ---      50.5     ---
High Frequency Economics      0.5%     ---      50.0     ---
HSBC Markets                  0.1%     4.0%     50.0     ---
Hugh Johnson Advisors         ---      ---      50.5     ---
IDEAglobal                    ---      4.0%     51.0     ---
IHS Global Insight            ---      ---      54.0     ---
Informa Global Markets        ---      ---      52.0     ---
ING Financial Markets         0.2%     4.2%     51.0       18
Intesa-SanPaulo               ---      ---      50.0     ---
J.P. Morgan Chase             ---      4.5%     53.0     ---
Janney Montgomery Scott      -0.6%     3.0%     50.3     ---
Jefferies & Co.               ---      ---      50.0     ---
Landesbank Berlin             ---      ---      50.0     ---
Landesbank BW                 ---      ---      53.0     ---
MF Global                     0.4%     4.4%     49.0     ---
MFC Global Investment         ---      ---      51.5     ---
Mizuho Securities            -0.1%     ---      50.0     ---
Moody’s Economy.com           ---      ---      54.2     ---
Morgan Stanley & Co.          ---      ---      51.0     ---
National Bank Financial       ---      ---      51.0     ---
Natixis                       0.0%     3.3%     53.4     ---
Nomura Securities Intl.       ---      4.1%     50.0     ---
Pierpont Securities LLC       ---      ---      51.0     ---
PineBridge Investments        0.4%     ---      52.0       13
Raiffeisen Zentralbank        ---      ---      55.0     ---
Raymond James                 ---      ---      53.0     ---
RBC Capital Markets           ---      ---      54.0     ---
Ried, Thunberg & Co.          0.0%     ---      52.0     ---
Scotia Capital                ---      3.7%     52.0     ---
Societe Generale              ---      ---      53.0     ---
Standard Chartered           -0.4%     2.9%     53.0     ---
State Street Global Markets   ---      3.7%     50.9       11
Stone & McCarthy Research     ---      ---      52.0     ---
TD Securities                 ---      ---      55.0     ---
Thomson Reuters/IFR           ---      3.8%     54.0     ---
Tullett Prebon                ---      ---      50.0     ---
UBS                           0.0%     ---      50.0     ---
UniCredit Research            ---      5.1%     51.0     ---
Union Investment              ---      ---      52.0     ---
University of Maryland       -0.4%     3.6%     51.0     ---
Wells Fargo & Co.             ---      ---      50.6     ---
WestLB AG                     0.3%     3.6%     51.0     ---
Westpac Banking Co.           ---      ---      54.5       10
Woodley Park Research         ---      4.1%     52.1     ---
Wrightson Associates          0.3%     ---      52.0       20
==============================================================

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.