Pending Sales of U.S. Existing Homes Likely Rose Last Month

The number of contracts to buy previously owned homes rose in November for a fourth time in five months, extending a recovery following a post-credit plunge, economists said before a report today.

The index of pending resales rose 0.8 percent after jumping a record 10 percent in October, economists surveyed by Bloomberg News forecast the National Association of Realtors will report today at 10 a.m. Other data may show claims for unemployment insurance benefits dropped last week.

Home demand is stabilizing after sales collapsed to a record low in July as the effects of a government incentive worth as much as $8,000 waned. A jobless rate hovering near 10 percent means foreclosures will remain elevated and any recovery in housing, the industry that precipitated the worst recession since the 1930s, will take time to develop.

“We had an artificial boost in the spring as the homebuyer tax credit was set to expire,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Housing will remain at pretty low levels through next year.”

The projected increase in pending home sales was based on the median of 24 forecasts in the Bloomberg survey. Estimates ranged from a drop of 5 percent to a 5 percent gain.

Photographer: Jim R. Bounds/Bloomberg

A "Sold" sign sits outside a home in Cary, North Carolina. Close

A "Sold" sign sits outside a home in Cary, North Carolina.

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Photographer: Jim R. Bounds/Bloomberg

A "Sold" sign sits outside a home in Cary, North Carolina.

A Labor Department report at 8:30 a.m. may show the number of applications for jobless benefits fell to 415,000 last week, near the two-year low of 410,000 reached in the middle of last month, according to the survey median. The drop in claims signals firings are slowing, which may precede gains in hiring as the economy improves.

Purchasers Upbeat

At 9:45 a.m., a report from the Institute for Supply Management-Chicago Inc. may show businesses continued to grow in December. The purchasing managers’ gauge fell to 61, according to economists surveyed, from a seven-month high of 62.5 in November. The index has exceeded 50, signaling expansion, since October 2009.

Even as the labor market is improving and manufacturing is growing, housing remains a weak link. NAR chief economist Lawrence Yun last week estimated there were about 4.5 million distressed properties that could potentially reach the market in coming months.

Average home prices as measured by the S&P/Case-Shiller indexes have begun dropping again after rising when the tax incentive was in effect. The group’s 20-city index fell 0.8 percent in October from a year earlier, the biggest year-on-year decline since December. It fell 1 percent from the prior month, and is down 30 percent from its July 2006 peak.

Housing Woes

Reports earlier this month showed the housing market is stuck near recession levels. 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. Existing home sales represent closings on the contracts captured by the pending sales gauge.

The lack of demand has depressed builder stocks this year. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., is up 1.8 percent since Dec. 31, while the broader S&P 500 has climbed 13 percent.

Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, on Dec. 22 reported a fourth-quarter loss bigger than analysts expected as revenue fell 19 percent.

“The year can generally be described as one where we and the industry were bouncing along the bottom,” Chief Executive Officer Ara Hovnanian said on a conference call.

Even so, economists this month have boosted projections for fourth-quarter growth, reflecting a pickup in consumer spending and passage of an $858 billion bill extending all Bush-era tax cuts for two years.

                        Bloomberg Survey

================================================================
                           Initial    Cont.  Chicago  Pending
                            Claims   Claims       PM    Homes
                            ,000’s   ,000’s    Index     MOM%
================================================================

Date of Release              12/30    12/30    12/30    12/30
Observation Period          25-Dec   18-Dec     Dec.     Nov.
----------------------------------------------------------------
Median                         415     4084     61.0     0.8%
Average                        415     4072     61.3     0.7%
High Forecast                  430     4110     63.7     5.0%
Low Forecast                   395     4000     59.0    -5.0%
Number of Participants          28       11       49       24
Previous                       420     4064     62.5    10.4%
----------------------------------------------------------------
4CAST Ltd.                     424     ---      60.6     ---
ABN Amro Inc.                 ---      ---      60.0     2.0%
Action Economics               420     4060     60.0    -0.7%
Aletti Gestielle              ---      ---      61.7     ---
Ameriprise Financial          ---      ---      60.0     2.0%
Bank of Tokyo- Mitsubishi      415     ---      63.2     ---
Bantleon Bank AG              ---      ---      60.0     ---
Barclays Capital               410     ---      60.0     3.5%
BBVA                           415     4080     61.5    -3.5%
BMO Capital Markets            415     4084     61.0    -2.0%
BNP Paribas                   ---      ---      61.0     ---
BofA Merrill Lynch Research    417     ---      60.0    -1.5%
Briefing.com                   415     4000     61.5    -3.0%
Capital Economics             ---      ---      62.0     ---
Citi                           395     4110     62.0     ---
ClearView Economics           ---      ---      60.0     5.0%
Commerzbank AG                ---      ---      62.0     ---
Credit Suisse                  415     ---      63.0     ---
DekaBank                      ---      ---      61.0    -1.0%
Desjardins Group               425     ---      59.0     ---
Deutsche Bank Securities       415     ---      61.0     5.0%
First Trust Advisors          ---      ---      62.9     ---
Goldman, Sachs & Co.          ---      ---      61.0     ---
Helaba                         420     ---      60.0     ---
Horizon Investments           ---      ---      62.0    -1.0%
HSBC Markets                  ---      ---      60.0     ---
Hugh Johnson Advisors         ---      ---      63.0     ---
Ibersecurities                ---      ---      62.0     ---
IDEAglobal                     423     ---      63.0     ---
Informa Global Markets         415     4090     60.0     0.5%
Intesa-SanPaulo               ---      ---      62.7     ---
J.P. Morgan Chase              410     ---      ---      ---
Jefferies & Co.               ---      ---      60.5     ---
Landesbank Berlin              425     ---      60.0     ---
Landesbank BW                 ---      ---      61.0     ---
Maria Fiorini Ramirez          410     ---      ---      ---
MF Global                     ---      ---      60.0     0.0%
Moody’s Analytics              410     4110     61.0     3.5%
Nomura Securities Intl.       ---      ---      62.5     ---
Nord/LB                       ---      ---      61.5     ---
Pierpont Securities LLC        400     ---      ---      ---
PineBridge Investments        ---      ---      59.0    -3.0%
Raiffeisenbank International  ---      ---      60.0     ---
RBS Securities Inc.           ---      ---      62.8     4.0%
Scotia Capital                 430     4100     ---      2.0%
State Street Global Markets    415     4058     63.0     ---
Stone & McCarthy Research      420     ---      63.7     ---
TD Securities                  410     4000     62.0     5.0%
Thomson Reuters/IFR            399     ---      61.5    -1.5%
UBS                            415     ---      62.5     1.0%
University of Maryland         420     ---      60.5     3.6%
WestLB AG                     ---      ---      61.0     ---
Westpac Banking Co.           ---      ---      ---     -5.0%
Wrightson ICAP                 415     4100     62.0     2.0%
================================================================

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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