Home Prices Probably Cooled, U.S. Consumer Sentiment Languished

The rebound in U.S. home prices probably slowed, while consumer confidence languished near a five-month low, indicating threats to the economic recovery are mounting, economists said before reports today.

Property values in 20 cities climbed 3.5 percent in June from the same month last year, down from a 4.6 percent gain in the 12 months to May, according to the median forecast of 21 economists surveyed by Bloomberg News. Another report may show sentiment stagnated in August.

Record foreclosures, unemployment near a 26-year high and a plunge in sales following the end of a government tax credit will probably pressure home values in coming months. Further erosion in home equity may undermine Americans’ confidence and limit consumer spending, which accounts for about 70 percent of the economy.

“The housing market is in the midst of a double dip, with sales declining and prices likely to,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “Consumers are in a state of repairing their balance sheets. It would be fairly problematic for consumer spending if there was another home-price decline.”

The home-price data from S&P/Case-Shiller are due at 9 a.m. New York time. Estimates ranged from increases of 2.5 percent to 4.2 percent. It would be the first time the measure failed to improve since a 19 percent drop in the year ended January 2009, which was the worst performance in records dating to 2001.

Consumer Confidence

A report from the Conference Board, a New York-based research group, will show its sentiment gauge was little changed at 50.7 in August compared with 50.4 the prior month, according to the survey median. Estimates ranged from 47.5 to 55. July’s reading was the lowest since February, and the gauge averaged 45 in 2009 and 97 during the expansion that ended in December 2007.

Home prices rose 0.2 percent in June from the prior month, according to the Bloomberg survey, compared with a 0.5 percent May advance.

The year-over-year gauge 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.

Builders such as KB Home and Lennar Corp. reported sales dropped after April 30, the deadline for buyers to sign purchase contracts and qualify for a tax credit worth as much as $8,000. The deadline to close transactions, originally set for June 30, was extended to Sept. 30.

No More Incentives

Donald Tomnitz, chief executive officer of D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, said he welcomes the end of federal incentives aimed at demand.

“I don’t want the tax credit to be re-enacted or be recreated or extended,” Tomnitz said on an Aug. 3 conference call with investors. “We want to get back to a normalized market.”

The S&P Supercomposite Homebuilder Index, which includes D.R. Horton and Lennar, has dropped about 32 percent since reaching a 19-month high on May 3. The broader S&P 500 Index is down 14 percent from April 23’s 19-month peak.

Purchases of new homes plunged in July to a record low, and the median price was the lowest level since 2003, Commerce Department data showed this month. The National Association of Realtors reported a record 27 percent drop in July sales of existing houses.

Mounting Foreclosures

Foreclosures may be an obstacle for much of the year. A record 269,962 U.S. homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010, according to RealtyTrac Inc., an Irvine, California-based data company.

The economy is a top issue for voters in the November congressional elections, and polls show the public is increasingly skeptical of President Barack Obama’s performance. Public approval for the president’s handling of the economy was at 41 percent in an Aug. 11-16 Associated Press-GfK survey, an all-time low and down from 50 percent last July.

In an effort to help struggling homeowners pay their mortgages, the Obama administration will begin a Federal Housing Authority refinancing effort for qualified borrowers and will start an emergency homeowners’ loan program for unemployed borrowers so they can stay in their homes, Housing and Urban Development Secretary Shaun Donovan said on CNN’s “State of the Union” this week.

Manufacturing, the industry that helped the U.S. rebound from the worst recession since the 1930s, is showing signs of weakening. A report from the Institute for Supply Management- Chicago Inc. at 9:45 a.m. New York time may its show business barometer dropped this month to the lowest level since November, according to the survey’s median estimate.

                       Bloomberg Survey

==============================================================
                         Case ShilCase Shil  Chicago Consumer
                           Monthly  Monthly       PM     Conf
                              MOM%     YOY%    Index    Index
==============================================================

Date of Release              08/31    08/31    08/31    08/31
Observation Period            June     June     Aug.     Aug.
--------------------------------------------------------------
Median                        0.2%     3.5%     57.0     50.7
Average                       0.2%     3.6%     56.8     50.7
High Forecast                 0.5%     4.2%     60.0     55.0
Low Forecast                 -0.6%     2.5%     53.0     47.5
Number of Participants          17       21       55       68
Previous                      0.5%     4.6%     62.3     50.4
--------------------------------------------------------------
4CAST Ltd.                    ---      4.2%     55.0     50.0
ABN Amro Bank                 0.3%     ---      58.0     52.0
Action Economics              ---      ---      56.0     51.0
Aletti Gestielle SGR          ---      ---      57.0     49.5
Ameriprise Financial Inc      ---      ---      55.0     49.5
Banesto                       ---      3.6%     58.2     51.2
Bank of Tokyo- Mitsubishi     ---      ---      57.5     53.0
Barclays Capital              0.2%     4.1%     56.0     50.0
Bayerische Landesbank         ---      ---      ---      50.8
BBVA                         -0.6%     2.5%     58.0     50.0
BMO Capital Markets           ---      3.9%     58.0     51.5
BNP Paribas                   ---      ---      56.0     51.0
BofA Merrill Lynch Resear     ---      3.4%     56.5     49.5
Briefing.com                  ---      3.0%     58.0     49.5
Capital Economics             0.2%     4.1%     53.0     48.0
Citi                          ---      ---      57.0     49.0
ClearView Economics           0.2%     ---      ---      ---
Commerzbank AG                ---      3.5%     57.0     50.0
Credit Agricole CIB           ---      ---      57.0     50.4
Credit Suisse                 ---      ---      58.0     48.0
Danske Bank                   ---      ---      56.8     51.4
DekaBank                      ---      ---      55.0     49.0
Desjardins Group              ---      3.9%     57.0     49.0
Deutsche Bank Securities      0.3%     ---      58.5     51.5
Deutsche Postbank AG          ---      ---      ---      50.5
DZ Bank                       ---      3.5%     58.2     49.5
Exane                         ---      ---      ---      52.5
First Trust Advisors          ---      ---      57.7     52.3
FTN Financial                 ---      ---      60.0     ---
Goldman, Sachs & Co.          ---      ---      58.0     51.5
Helaba                        ---      ---      57.0     ---
High Frequency Economics      0.5%     ---      55.0     50.0
HSBC Markets                  0.0%     ---      55.0     51.0
Hugh Johnson Advisors         ---      ---      59.0     51.6
IDEAglobal                    ---      4.0%     60.0     55.0
IHS Global Insight            ---      ---      ---      52.5
Informa Global Markets        ---      ---      59.2     50.8
ING Financial Markets         0.0%     3.9%     57.0     51.5
Intesa-SanPaulo               ---      ---      55.0     52.0
J.P. Morgan Chase             ---      4.2%     ---      50.0
Janney Montgomery Scott L     0.4%     3.1%     ---      50.0
Jefferies & Co.               ---      ---      60.0     49.0
Landesbank Berlin             ---      ---      56.0     50.0
Landesbank BW                 ---      ---      57.0     52.0
MFC Global Investment Man     ---      ---      ---      50.0
Moody’s Economy.com           ---      ---      58.1     51.3
Morgan Stanley & Co.          ---      ---      ---      54.0
National Bank Financial       ---      ---      ---      50.0
Natixis                       0.3%     3.5%     ---      50.0
Nomura Securities Intl.       ---      3.1%     56.0     ---
Nord/LB                       ---      ---      56.0     52.0
Pierpont Securities LLC       ---      ---      ---      52.5
PineBridge Investments        0.1%     ---      55.0     52.0
Raiffeisen Zentralbank        ---      ---      ---      51.0
Raymond James                 ---      ---      58.0     51.5
RBC Capital Markets           ---      ---      56.0     53.2
RBS Securities Inc.           ---      ---      ---      47.5
Scotia Capital                0.2%     ---      ---      ---
Societe Generale              ---      ---      56.0     51.0
Standard Chartered            ---      ---      ---      51.0
State Street Global Marke     0.2%     3.4%     56.9     49.8
Stone & McCarthy Research     ---      ---      54.1     50.0
TD Securities                 ---      ---      55.0     51.0
Thomson Reuters/IFR           ---      2.6%     53.0     55.0
Tullett Prebon                ---      ---      58.0     49.0
UBS                           0.3%     ---      57.0     50.0
Union Investment              ---      ---      ---      50.5
University of Maryland       -0.3%     3.6%     59.0     51.0
Wells Fargo & Co.             ---      ---      ---      49.9
WestLB AG                     ---      3.5%     59.0     49.0
Westpac Banking Co.           ---      ---      54.0     48.0
Woodley Park Research         ---      ---      53.7     50.3
Wrightson ICAP                0.4%     ---      59.0     52.0
==============================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

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.