U.S. Economy: Sales of Existing Homes, Leading Index Increase
Sales of U.S. Existing Homes Rose in August
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
Sept. 23 (Bloomberg) -- Guy LeBas, chief fixed-income strategist with Janney Montgomery Scott, a financial advisory firm based in Philadelphia, talks with Bloomberg's Mark Crumpton about the outlook for the U.S. economy. Sales of U.S. previously owned homes climbed from a record low in August and a gauge of the outlook for the economy increased, confirming the Federal Reserve’s forecast for a “modest” pace of expansion. (Source: Bloomberg)
Aug. 24 (Bloomberg) -- Markus Schomer, chief economist at Pinebridge Investments, talks about the outlook for the U.S. housing market and the rise in initial jobless claims last week. Purchases of existing houses climbed to a 4.13 million annual pace, in line with the median forecast of economists surveyed by Bloomberg News and second only to July’s 3.84 million rate as the weakest in a decade’s worth of data, the National Association of Realtors said today in Washington. Pinebridge speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Sept. 23 (Bloomberg) -- Sales of U.S. previously owned homes rose in August to the second-lowest level on record, indicating housing remains depressed a year after the economic recovery began. Purchases of existing houses climbed to a 4.13 million annual pace, in line with the median forecast of economists surveyed by Bloomberg News and second only to July’s 3.84 million rate as the weakest in a decade’s worth of data, the National Association of Realtors said today in Washington. Bloomberg's Margaret Brennan and Michael McKee report. (Source: Bloomberg)
Sales of U.S. previously owned homes climbed from a record low in August and a gauge of the outlook for the economy increased, confirming the Federal Reserve’s forecast for a “modest” pace of expansion.
Purchases of existing houses climbed to a 4.13 million annual pace, the second-lowest on record, the National Association of Realtors said today in Washington. The New York- based Conference Board said its index of leading economic indicators rose 0.3 percent, exceeding forecasts.
“Growth should start to gather momentum again by the fourth quarter,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “Housing is not going to be a big contributor to growth.”
An unexpected increase in claims for unemployment benefits reported today by the Labor Department was a reminder of weakness in the job market that will hold back the pace of recovery from the worst recession since the 1930s. Fed policy makers this week said they are prepared to further ease monetary policy to support growth and stabilize prices.
Stocks dropped on mounting concern the global recovery will slow. The Standard & Poor’s 500 Index fell 0.8 percent to 1,124.83 at the 4:00 a.m. close in New York. Treasuries gained, pushing the 10-year note’s yield below 2.50 percent for the first time since Sept. 1 on speculation the Fed may increase purchases of U.S. debt to support the economy.
More Claims
Initial jobless claims rose by 12,000 to 465,000 in the week ended Sept. 18. The total number of people receiving unemployment insurance declined, while those getting extended payments increased.
Economists forecast home sales at a 4.1 million pace, according to the median of 72 projections in a Bloomberg News survey. Estimates ranged from 3.8 million to 5 million.
Compared with a year earlier, sales were down 17 percent before adjusting for seasonal patterns. The median price increased 0.8 percent from August 2009 to $178,600 last month.
A government tax credit of up to $8,000 gave housing a temporary lift late last year and into 2010. Demand plunged in July, the month after buyers were originally required to close deals in order to get the incentive. The deadline has since been extended to the end of this month.
The end of the homebuyer credit, joblessness and sagging confidence prompted a decline in orders at Hovnanian Enterprises Inc., the largest homebuilder in New Jersey said on Sept 1. The company said its net orders dropped 37 percent in the quarter ended July 31 from a year earlier.
Jobs are ‘Key’
“Job creation is the key to a housing recovery, which makes it difficult to predict how improvements in the economy and housing market play out,” Chief Executive Officer Ara Hovnanian said in a statement.
The Obama administration has said it plans to announce proposals in the next few weeks for an emergency loan program for the unemployed to avert default, and a government mortgage refinancing effort to lower monthly mortgage payments to avoid foreclosures.
The unemployment rate will average more than 9 percent through 2011, according to economists surveyed by Bloomberg News. That will undermine confidence and signals foreclosures will hinder real estate as households struggle to make mortgage payments.
Textron Inc., a Providence, Rhode Island-based maker of airplanes, said Sept. 21 it is cutting 700 jobs and adjusting production schedules at its Cessna unit because of continued weakness in new orders.
Business Jets
“While we are seeing solid performance in most of our other businesses, we have not yet seen a discernable improvement in business-jet order activity,” Chief Executive Officer Scott Donnelly said in a statement.
The Fed kept its benchmark interest rate in the range of zero to 0.25 percent this week, where it’s been since December 2008, and said the pace of recovery and job growth have “slowed in recent months.”
The central bank said it will “continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed.”
The 0.3 percent gain in the leading index, a gauge of the prospects for the economy in the next three to six months, follows a 0.1 percent increase in July. The index was forecast to rise 0.1 percent, according to the median estimate in a Bloomberg News survey of 56 economists.
Seven of the 10 indicators in the index contributed to the gain, led by the spread between the federal funds rate and the yield on the 10-year Treasury note and an increase in money supply. Components weighing on the index included rising jobless claims and a drop in manufacturing supplier deliveries.
Consumer Goods
The Conference Board’s index of coincident indicators, a gauge of current economic activity, was unchanged in August after a 0.1 percent gain the previous month. The coincident index tracks payrolls, incomes, sales and production -- the measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions.
The Cambridge, Massachusetts-based group this week said the worst U.S. recession since the Great Depression ended in June 2009, lasting 18 months.
Automakers including Ford Motor Co. are among manufacturers seeing sales picking up while holding below pre-recession levels.
“The auto business is pretty steady and coming back up a little bit,” Ford Chief Executive Officer Alan Mulally told reporters in Ann Arbor, Michigan on Sept. 17. The economy “is coming back slower than past recessions. We just need a little bit more consumer confidence to know we’re growing the economy.”
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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