Home Prices Probably Fell, Showing U.S. Economy's Weak Link
Home Prices Probably Fell
Ronda Churchill/Bloomberg
Property values in 20 cities were down 0.2 percent from October 2009, the first year-over-year decline since January, according to the median forecast of 17 economists surveyed by Bloomberg News.
Property values in 20 cities were down 0.2 percent from October 2009, the first year-over-year decline since January, according to the median forecast of 17 economists surveyed by Bloomberg News. Photographer: Ronda Churchill/Bloomberg
Dec. 27 (Bloomberg) -- Charles Lieberman, chief investment officer at Advisors Capital Management LLC, and Charles Ortel, managing director at Newport Value Partners, talk about the outlook for the U.S. economy in 2011. Lieberman and Ortel also discuss U.S. economic policies, the outlook for the dollar, India and China's economies, and investment strategy. They talk with Pimm Fox on Bloomberg Television's "Midday Surveillance." (Source: Bloomberg)
Home prices probably dropped in October, a sign housing will remain a weak link as the U.S. recovery accelerates into the new year, economists said before reports today.
Property values in 20 cities were down 0.2 percent from October 2009, the first year-over-year decline since January, according to the median forecast of 17 economists surveyed by Bloomberg News. Other data may show consumer confidence rose to a seven-month high this month.
A wave of foreclosures waiting to reach the market means home prices will remain under pressure in 2011, representing a risk to household finances. Rising stock values and an improving job market will probably help offset the damage, ensuring that confidence and spending continue to strengthen.
“It’s going to take a long time for this excess inventory to clear and that means further downward pressure on prices,” said Neil Dutta, an economist at Bank of America Merrill Lynch Global Research in New York. “Consumer confidence has recovered, but it’s not predicting a boom in the economy.”
S&P/Case-Shiller home-price index is due at 9 a.m. New York time. Economists surveyed projected the gauge declined 0.6 percent in October from the prior month, when it fell 0.8 percent. The index was down 29 percent in September from its July 2006 peak.
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.
Fewer Permits
Reports earlier this month showed the housing market is stuck near recession levels even as the broader economy is recovering. Housing permits fell in November to the third-lowest level on record, while starts rose for the first time in three months, the Commerce Department reported Dec. 16.
Sales of new and existing homes last month rose less than projected by the median forecast of economists surveyed by Bloomberg, reports from the Commerce Department and the National Association of Realtors showed last week.
The lack of demand has depressed homebuilding stocks this year. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., is up 3.2 percent since Dec. 31, while the broader S&P 500 has increased 13 percent.
Rising stock prices are helping mend household finances even as home values slide, one reason why sentiment and spending are improving as 2010 comes to a close.
More Confidence
The Conference Board’s confidence index increased to 56.4 this month from 54.1 in November, according to the median estimate of economists surveyed. The index averaged 96.8 during the last economic expansion that ended in December 2007.
Job growth is also helping boost confidence. Employers added 951,000 workers to payrolls in the first 11 months of the year, according to figures from the Labor Department. December data is due Jan. 7.
The gains haven’t been large enough to reduce unemployment, which was at 9.8 percent last month after finishing 2009 at 10 percent.
Growing confidence and more jobs are helping lift household spending, which accounts for 70 percent of the economy. The International Council of Shopping Centers on Dec. 14 revised its November-December holiday-season sales forecast up by 0.5 percentage point to a range of 3.5 percent to 4 percent.
Carnival Corp., the world’s biggest cruise-line operator, last week forecast fiscal 2011 earnings will rise as ticket prices strengthen.
‘Strong’ Bookings
“Booking trends have continued to improve for both our North American and European brands, particularly for our peak summer season,” Chief Executive Officer Micky Arison said in a Dec. 21 statement. The Miami-based company’s heaviest booking period, which begins in early January, will be “strong,” he said.
Economists this month have boosted projections for fourth- quarter growth, reflecting a pickup in spending and passage of an $858 billion bill extending all Bush-era tax cuts for two years. The legislation also continues expanded unemployment insurance benefits through 2011 and cuts payrolls taxes by 2 percentage points next year.
Bloomberg Survey
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Case Shil Case Shil Consumer Richmond
Monthly Monthly Conf Fed
MOM% YOY% Index Index
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Date of Release 12/28 12/28 12/28 12/28
Observation Period Oct. Oct. Dec. Dec.
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Median -0.6% -0.2% 56.4 11
Average -0.7% -0.1% 56.5 11
High Forecast 0.2% 1.4% 60.0 12
Low Forecast -1.2% -1.3% 53.0 9
Number of Participants 16 17 60 7
Previous -0.8% 0.6% 54.1 9
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4CAST Ltd. --- 0.2% 55.5 ---
ABN Amro Inc. -0.2% --- 55.5 ---
Action Economics --- --- 57.0 ---
Aletti Gestielle SGR --- --- 55.7 ---
Ameriprise Financial --- --- 57.0 11
Bank of Tokyo- Mitsubishi --- --- 56.1 ---
Bantleon Bank AG --- --- 56.0 ---
Barclays Capital -0.6% -1.3% 55.5 ---
Bayerische Landesbank --- --- 56.5 ---
BBVA -0.5% 0.1% 57.0 ---
BMO Capital Markets -1.0% -0.5% 56.0 11
BNP Paribas --- --- 57.0 ---
BofA Merrill Lynch Research --- -0.5% 57.0 ---
Briefing.com --- -0.2% 56.0 ---
Capital Economics -1.0% -0.3% 53.0 ---
Citi --- --- 57.0 ---
ClearView Economics --- --- 55.0 ---
Commerzbank AG --- -0.2% 56.0 ---
Credit Agricole CIB --- --- 55.5 ---
Credit Suisse --- --- 57.0 ---
Daiwa Securities America --- --- 58.0 ---
DekaBank --- --- 56.5 ---
Desjardins Group --- 0.1% 56.5 ---
Deutsche Bank Securities --- --- 58.0 ---
Deutsche Postbank AG --- --- 59.0 ---
First Trust Advisors --- --- 57.4 ---
Goldman, Sachs & Co. -0.6% --- 57.0 ---
Helaba --- --- 56.5 ---
Horizon Investments --- --- 56.0 ---
HSBC Markets -0.8% --- 56.0 ---
Hugh Johnson Advisors --- --- 54.8 ---
IDEAglobal --- 0.2% 56.0 ---
IHS Global Insight --- --- 56.9 ---
ING Financial Markets -0.6% -0.1% 55.6 11
Intesa-SanPaulo --- --- 56.0 ---
J.P. Morgan Chase --- -0.2% 56.5 ---
Jefferies & Co. --- --- 57.0 ---
Landesbank Berlin --- --- 58.5 ---
Landesbank BW --- -0.4% 57.0 ---
MF Global -0.9% --- 55.0 ---
Moody’s Analytics --- --- 58.3 ---
Morgan Stanley & Co. --- --- 56.0 ---
National Bank Financial --- --- 56.5 ---
Natixis 0.2% --- 55.0 ---
Nord/LB --- --- 57.0 ---
Pierpont Securities --- --- 59.5 ---
PineBridge Investments -0.5% --- 57.0 12
Raiffeisenbank International --- --- 60.0 ---
Raymond James --- --- 55.5 ---
RBS Securities Inc. --- --- 58.3 ---
Scotia Capital --- -0.2% --- 11
Standard Chartered -0.6% --- 55.5 ---
State Street Global Markets --- --- 56.3 ---
Stone & McCarthy Research --- --- 56.0 ---
TD Securities -1.0% -0.5% 55.0 ---
Thomson Reuters/IFR --- 0.0% 58.5 ---
UBS -1.2% --- 55.0 ---
University of Maryland -0.4% 1.4% 56.0 ---
Wells Fargo & Co. --- --- 57.3 ---
WestLB AG --- --- 54.5 ---
Westpac Banking Co. --- --- --- 10
Wrightson ICAP -0.7% --- 55.0 9
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To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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