U.S. Pending Home Sales Rise in Sign Market Steadying
Home Prices in 20 U.S. Cities Rise More Than Forecast
Derick E. Hingle/Bloomberg
A sign stands outside an existing home for sale in Hammond, Louisiana.
A sign stands outside an existing home for sale in Hammond, Louisiana. Photographer: Derick E. Hingle/Bloomberg
Aug. 31 (Bloomberg) -- Karl Case, an economics professor at Wellesley College and co-creator of the S&P/Case-Shiller home-price index, discusses the U.S. housing market. The S&P/Case-Shiller index of property values for 20 U.S. cities increased 4.2 percent in June from a year earlier, the group said today in New York. The median estimate of economists surveyed by Bloomberg News called for a 3.5 percent advance. Case speaks with Tom Keene and Ken Prewitt on Bloomberg Radio's "Bloomberg Surveillance." (Source: Bloomberg)
Pending sales of existing houses unexpectedly climbed in July from a record low, indicating the real-estate market is steadying following the end of a government tax credit.
The index of purchase contracts rose 5.2 percent after a revised 2.8 percent drop the prior month, figures from the National Association of Realtors showed today in Washington. Combined with data showing claims for unemployment benefits dropped and orders to factories increased, the reports allayed concern the economy was tipping back into a recession.
“We’re growing at a mediocre clip,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “We just haven’t rebounded sufficiently from the severe recession.”
Today’s reports support Federal Reserve Chairman Ben S. Bernanke’s scenario for a “modest” pace of expansion in the second half of the year. Figures from the Labor Department tomorrow are projected to show the jobless rate rose in August for the first time in four months, showing the pace of economic growth is not enough to revive employment.
Stocks rose as retailers climbed after industry figures showed back-to-school discounts and tax holidays lured consumers last month. The Standard & Poor’s 500 Index rose 0.9 percent to 1,090.1 at the 4 p.m. close in New York. The S&P 500 Retailing Index rose 2.2 percent.
Tax Credit
Home sales plunged following the April 30 deadline to sign contracts and become eligible for a government tax credit worth up to $8,000. While record-low mortgage rates are helping to make homes more affordable, further gains depend on the economy creating jobs.
The July rebound “points to some stabilization in existing home sales at very low levels in August,” Yelena Shulyatyeva, an economist at BNP Paribas in New York, said in an e-mail. “The housing market outlook remains highly uncertain in light of mounting inventories from foreclosed and vacant properties.”
To help homeowners who’ve lost income avoid foreclosure, the Obama administration plans to offer $1 billion in zero- interest loans as part of $3 billion in additional aid targeting economically distressed areas.
Pending sales were projected to fall 1 percent, according to the median forecast of 37 economists surveyed by Bloomberg News. Estimates ranged from a drop of 5 percent to an increase of 4 percent. The index rose for the first in three months, reaching the third-lowest in data going back to 2001.
Elevated Claims
The number of Americans seeking jobless benefits fell last week to a level that indicates the labor market has not improved this year. Initial jobless claims dropped by 6,000 to 472,000 in the week ended Aug. 28, the Labor Department said. Applications exceeded the 463,000 average so far this year.
“The rate of layoffs is still uncomfortably high,” said Chris Low, chief economist at FTN Financial in New York.
The August payrolls report tomorrow may show the economy lost 100,000 jobs, the third straight monthly decline, according to the Bloomberg survey median. The drop will reflect dismissals of temporary government workers who were hired for the census. The unemployment rate rose to 9.6 percent from 9.5 percent, economists forecast.
Factory orders rose 0.1 percent in July, less than forecast, restrained by a slump in demand for business equipment, a Commerce Department report showed today. The 0.1 percent rise in bookings followed a 0.6 percent decrease in June.
Uneven Recovery
A report yesterday showing manufacturing picked up in August signaled any factory slowdown will not be broad-based as companies like Caterpillar Inc. report increasing demand from overseas while Cisco Systems Inc. and Intel Corp. are among those lowering forecasts. Manufacturing, which accounts for about 11 percent of the world’s largest economy, helped pull the U.S. out of the worst recession since the 1930s.
“Manufacturing is edging back to more moderate, but sustainable, growth,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, who accurately forecast the gain in orders. “For the recovery to continue, we’re going to need an ongoing recovery in manufacturing.’
Some manufacturers are downgrading their forecasts. Intel, the world’s biggest chipmaker, last week cut its third-quarter revenue projection, citing weaker-than-expected consumer demand for personal computers in mature markets as the reason for the adjustment.
Cutting Forecasts
Cisco, the world’s largest maker of networking equipment, in August forecast first-quarter sales that missed analysts’ estimates. Chief Executive Officer John Chambers said the San Jose, California-based company was seeing “unusual uncertainty” and getting “mixed signals” about the health of the economy.
Pending home sales rose in all four regions in July, today’s report showed, led by a 12 percent jump in the West and a 6.3 percent rise in the Northeast.
Compared with July 2009, nationwide pending sales were down 20 percent.
The Federal Open Market Committee on Aug. 10 decided to maintain the central bank’s holdings of securities at $2.05 trillion to keep money from being drained out of the financial system. The FOMC bank said it will reinvest principal payments on its mortgage holdings into long-term Treasury securities.
The panel also said that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated.” The central bank “will do all that it can to ensure continuation of the economic recovery,” Bernanke said at the annual Kansas City Fed forum in Wyoming last week.
To contact the reporters on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net
Rate These Stories
Rate this Page