Sales of U.S. Existing Homes Probably Fell as Moratoriums Held Back Market

Sales of existing homes probably dropped in October for the first time in three months as foreclosure moratoriums disrupted the U.S. housing market, economists said before a report today.

Purchases fell to a 4.48 million annual rate, down 1.1 percent from September, according to the median of 71 estimates in a Bloomberg News survey. Another report may show the U.S. economy expanded at a revised 2.4 percent annual rate in the third quarter, up from last month’s estimate of 2 percent.

An overhang of distressed properties and a jobless rate near 10 percent may restrain home sales, while concerns over faulty foreclosure proceedings threaten to delay the mending process even more. Minutes from the Federal Reserve’s meeting this month may help explain why policy makers decided to supply the world’s largest economy with an additional $600 billion in monetary stimulus.

“There’s still a large amount of properties on bank balance sheets,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “The potential supply overhang from these distressed properties represents the biggest risk to home prices over the next two years.”

The National Association of Realtors is scheduled to release the sales figures at 10 a.m. in Washington. Survey estimates ranged from 3.85 million to 4.7 million.

Photographer: Scott Olson/Getty Images

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Homes for sale in Pleasant Prairie, Wisconsin.

At 2 p.m. New York time the Fed will release the minutes of its Nov. 2-3 policy meeting that led to a second round of unconventional monetary easing in a bid to lower unemployment and prevent inflation from slowing even more. The report will also contain policy makers’ updated economic forecasts.

Growth Revised Up

The economy grew at a 2.5 percent annual rate in the third quarter, more than previously calculated, as companies increased shipments abroad and Americans boosted their spending, a report from the Commerce Department showed today.

The revised increase in gross domestic product compares with a 2 percent estimate issued last month and a 1.7 percent rise in the second quarter. Corporate profits grew last quarter at a slower pace and an increase in employee wages in the prior three months was almost twice as much as initially reported.

The housing market is one area weighing on U.S. growth. Foreclosure moratoriums across the country along with government investigations into faulty paperwork threaten to delay a recovery as houses slated for repossession take longer to come to market. Distressed properties accounted for 35 percent of sales in September, according to NAR data, before most moratoriums went into effect.

Sales of existing houses are 38 percent lower than the record 7.25 million pace reached in September 2005.

More Foreclosures

Foreclosures are mounting as unemployed Americans can’t meet monthly payments while growing numbers of homeowners, seeing their home prices slide to less than their mortgage values, also default. Delinquencies on prime fixed-rate mortgages jumped to a record in the third quarter, the Mortgage Bankers Association said Nov. 18.

Joblessness is forecast to average 9.3 percent next year, another reason why a recovery in housing may take years to evolve, even with mortgage rates near record lows.

Housing starts declined in October for a second consecutive month and were 77 percent below the three-decade peak of 2.27 million reached in January 2006.

D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, expects 2011 to be “challenging” for the industry as consumer confidence and employment remain weak, Chief Executive Officer Donald Tomnitz said on a Nov. 12 earnings conference call. The spring selling season, the strongest for builders, may fail to bring the traditional boost in demand, he said.

The lack of demand has depressed homebuilding stocks this year. The Standard & Poor’s Supercomposite Homebuilding Index, which includes D.R. Horton and Lennar Corp., is down 11 percent since Dec. 31. The broader S&P 500 is up 7.4 percent.

                        Bloomberg Survey

==============================================================
                               GDP Personal Core PCE    Exist
                            Annual Consump.   Prices    Homes
                              QOQ%     QOQ%     QOQ%     Mlns
==============================================================

Date of Release              11/23    11/23    11/23    11/23
Observation Period            3Q S     3Q S     3Q S     Oct.
--------------------------------------------------------------
Median                        2.4%     2.5%     0.8%     4.48
Average                       2.4%     2.5%     0.8%     4.45
High Forecast                 2.9%     2.7%     1.0%     4.70
Low Forecast                  2.0%     1.8%     0.8%     3.85
Number of Participants          78       23       21       71
Previous                      2.0%     2.6%     0.8%     4.53
--------------------------------------------------------------
4CAST Ltd.                    2.3%     ---      0.8%     4.42
ABN Amro Inc.                 2.5%     ---      ---      4.50
Action Economics              2.7%     ---      ---      4.70
Aletti Gestielle SGR          2.2%     2.5%     0.8%     4.40
Ameriprise Financial          2.4%     2.5%     0.8%     4.48
Banesto                       2.2%     ---      ---      4.50
Bank of Tokyo- Mitsubishi     2.8%     ---      ---      4.48
Bantleon Bank AG              2.4%     ---      ---      4.50
Barclays Capital              2.3%     ---      ---      4.62
Bayerische Landesbank         2.3%     2.5%     ---      ---
BBVA                          2.4%     2.5%     0.8%     4.68
BMO Capital Markets           2.4%     ---      ---      4.44
BNP Paribas                   2.1%     ---      ---      4.45
BofA Merrill Lynch Research   2.4%     ---      0.8%     4.35
Briefing.com                  2.5%     ---      ---      4.20
Capital Economics             2.4%     ---      ---      4.35
CIBC World Markets            2.5%     ---      ---      4.60
Citi                          2.3%     ---      ---      ---
ClearView Economics           2.4%     ---      0.8%     4.40
Credit Agricole CIB           2.4%     2.5%     ---      4.40
Credit Suisse                 2.4%     ---      ---      3.85
Daiwa Securities America      2.3%     ---      ---      4.50
Danske Bank                   ---      ---      ---      4.52
DekaBank                      2.3%     ---      ---      4.50
Desjardins Group              2.3%     ---      ---      4.40
Deutsche Bank Securities      2.5%     ---      ---      4.25
Deutsche Postbank AG          2.4%     ---      ---      ---
DZ Bank                       2.1%     ---      ---      4.45
First Trust Advisors          2.3%     2.6%     ---      4.48
Goldman, Sachs & Co.          2.3%     ---      0.8%     4.53
Helaba                        2.7%     ---      ---      4.20
High Frequency Economics      2.5%     ---      ---      4.40
HSBC Markets                  2.5%     2.3%     ---      4.40
Hugh Johnson Advisors         2.4%     ---      ---      4.65
IDEAglobal                    2.4%     2.7%     0.8%     4.50
IHS Global Insight            2.2%     ---      ---      4.25
Informa Global Markets        2.5%     2.7%     ---      4.20
ING Financial Markets         2.4%     ---      ---      4.45
Insight Economics             2.7%     ---      ---      4.25
Intesa-SanPaulo               2.3%     ---      ---      4.40
J.P. Morgan Chase             2.4%     2.6%     ---      4.60
Janney Montgomery Scott       2.2%     2.5%     0.8%     4.48
Jefferies & Co.               2.5%     ---      0.8%     4.55
Landesbank Berlin             2.0%     ---      ---      4.43
Landesbank BW                 2.6%     ---      ---      4.45
Maria Fiorini Ramirez         2.3%     ---      ---      4.50
MF Global                     2.3%     2.5%     0.8%     4.49
MFC Global Investment         2.4%     2.5%     0.8%     4.40
Moody’s Analytics             2.4%     ---      ---      4.43
Morgan Keegan & Co.           2.9%     ---      ---      ---
Morgan Stanley & Co.          2.4%     ---      ---      4.60
National Bank Financial       2.4%     2.5%     ---      4.65
Natixis                       2.6%     ---      ---      4.50
Newedge                       2.3%     2.6%     ---      ---
Nomura Securities Intl.       2.3%     ---      ---      4.60
Nord/LB                       2.6%     ---      ---      ---
Pierpont Securities LLC       2.3%     ---      ---      4.40
PineBridge Investments        2.8%     ---      ---      4.37
PNC Bank                      2.6%     ---      ---      4.53
Raiffeisen Zentralbank        2.3%     ---      0.8%     4.50
Raymond James                 2.5%     ---      ---      4.60
RBC Capital Markets           2.4%     2.7%     ---      4.50
RBS Securities Inc.           2.3%     ---      ---      4.45
Saxo Bank                     2.3%     2.5%     0.8%     ---
Scotia Capital                2.4%     ---      ---      4.49
Societe Generale              2.4%     2.5%     0.8%     4.66
Standard Chartered            2.3%     2.5%     ---      4.50
State Street Global Markets   2.7%     2.6%     0.8%     4.50
Stone & McCarthy Research     2.3%     ---      0.8%     4.45
TD Securities                 2.5%     2.6%     ---      4.60
Thomson Reuters/IFR           2.6%     ---      0.8%     4.30
Tullett Prebon                2.3%     ---      0.8%     4.45
UBS                           2.3%     2.5%     0.8%     4.53
Union Investment              2.4%     ---      ---      ---
University of Maryland        2.4%     1.8%     1.0%     4.36
Wells Fargo & Co.             2.2%     ---      ---      4.20
WestLB AG                     2.4%     ---      ---      4.50
Westpac Banking Co.           2.7%     ---      ---      4.35
Wrightson ICAP                2.3%     ---      ---      4.50
==============================================================

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

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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