Sales of U.S. Existing Homes Probably Rose as Demand Struggled to Rebound

Sales of U.S. previously owned houses probably rose in December for a second month as demand struggled to rebound from a decade low, economists said before a report today.

Purchases increased 4.1 percent from the prior month to a 4.87 million annual rate, according to the median forecast of 72 economists surveyed by Bloomberg News. Other reports may show a gauge of the economy’s direction grew for a sixth month, and manufacturing expanded in the Philadelphia region in January.

Buyers have been slow to return to the housing market after a government tax credit expired in the middle of 2010, as unemployment in excess of 9 percent shakes confidence. Record foreclosures are again pressuring home prices, among the concerns that have prompted Federal Reserve policy makers to follow through with a second round of quantitative easing.

“Housing remains subdued,” said David Semmens, a U.S. economist at Standard Chartered Bank in New York. “There’s still too much of an inventory overhang and activity is at low levels. It all comes back to the labor market not being strong enough.”

The National Association of Realtors’ data is due at 10 a.m. in Washington. Economists’ estimates ranged from 4.5 million to 5.07 million after November’s 4.68 million pace.

Photographer: Derick E. Hingle/Bloomberg

Buyers are returning to the housing market after a government tax credit expired in the middle of 2010, indicating the drop in prices and cheap lending rates are making homes more affordable. Close

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Photographer: Derick E. Hingle/Bloomberg

Buyers are returning to the housing market after a government tax credit expired in the middle of 2010, indicating the drop in prices and cheap lending rates are making homes more affordable.

Even with the gain, last month’s projected sales pace would fall short of the 4.91 million total for all of 2008, the fewest in 11 years. Purchases rose 5 percent to 5.16 million in 2009.

Outlook Improves

At 10 a.m., the New York-based Conference Board may report its index of leading indicators rose 0.6 percent in December, according to the Bloomberg survey median. A rising stock market, improving consumer expectations about the economy and fewer initial jobless claims helped boost the gauge, economists said.

A surge in housing permits last month, as builders in three states tried to win approval for projects ahead of changes to the building code, probably gave the leading index an additional lift in December.

A Labor Department report today showed initial applications for jobless benefits fell 37,000 last week, more than forecast by economists, to 404,000.

A regional Fed report at 10 a.m. may show factories in the Philadelphia area expanded this month, according to the survey median.

Credit’s Influence

The housing industry is trying to stabilize after demand see-sawed due to a buyer tax incentive of as much as $8,000, which required contracts to be signed by April 30 of 2010 and closed by the end of September. Existing-home sales slumped to a 3.84 million rate in July 2010, the weakest in a decade’s worth of record keeping, reflecting the expiration of the credit.

Earlier, purchases had surged to an almost three-year high 6.49 million pace in November 2009, the month the tax credit was originally due to end. It was subsequently extended.

A lack of sales and an overhang of unsold houses is discouraging builders from taking on projects. Housing starts fell in December to a 529,000 annual rate, the lowest level since October 2009, Commerce Department figures showed yesterday.

That helps explain why builders have underperformed the broader stock market. The Standard & Poor’s Supercomposite Homebuilder Index, which includes Toll Brothers Inc. and Lennar Corp., rose 2.3 percent last year, compared with a 13 percent gain for the S&P 500 Index. The builder gauge slumped 2.9 percent yesterday, the most in two months, on the disappointing construction data.

Cutting Costs

Lennar, the third-largest U.S. homebuilder by revenue, is among companies bracing for a slow rebound. The Miami-based builder on Jan. 11 reported fourth-quarter profit that beat analyst estimates on cost cuts and earnings from its distressed- investing unit.

“The housing recovery will traverse a long and bumpy road,” Stuart Miller, chief executive officer, said in a conference call that day. Still, “we’ve seen some early signs of gradual stabilization in the market.”

An unemployment rate of at least 9.4 percent since May 2009 is fueling a supply of distressed properties. The number of homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, according to RealtyTrac Inc. an Irvine, California-based data seller.

“Activity in residential real estate and new home construction remained slow across all Districts,” the Fed said Jan. 12 in its Beige Book report, based on anecdotal information that central bankers will use to determine policy at their meeting next week.

                         Bloomberg Survey

==============================================================
                           Initial    Exist      LEI   Philly
                            Claims    Homes               Fed
                            ,000’s     Mlns     MOM%    Index
==============================================================

Date of Release              01/20    01/20    01/20    01/20
Observation Period          15-Jan     Dec.     Dec.     Jan.
--------------------------------------------------------------
Median                         420     4.87     0.6%     20.8
Average                        423     4.86     0.7%     20.4
High Forecast                  462     5.07     1.2%     25.0
Low Forecast                   400     4.50     0.4%     12.5
Number of Participants          49       72       57       54
Previous                       445     4.68     1.1%     20.8
--------------------------------------------------------------
4CAST Ltd.                     425     4.75     0.6%     12.5
ABN Amro Inc.                  420     5.00     ---      23.0
Action Economics               420     4.95     1.0%     20.0
Aletti Gestielle               420     4.80     1.1%     23.0
Ameriprise Financial           425     4.90     0.6%     21.0
Banesto                        440     4.70     0.4%     19.0
Bank of Tokyo- Mitsubishi      415     4.85     0.7%     17.3
Bantleon Bank AG              ---      4.95     0.6%     ---
Barclays Capital               410     4.95     0.6%     20.0
Bayerische Landesbank          430     ---      0.7%     ---BBVA
430     4.76     0.8%     21.0
BMO Capital Markets            425     4.90     0.6%     22.0
BNP Paribas                    435     4.87     0.6%     22.0
BofA Merrill Lynch Research    420     4.92     0.6%     18.0
Briefing.com                   430     4.85     0.7%     21.0
Capital Economics             ---      4.85     0.8%     25.0 CIBC World Markets            ---      4.80     ---      ---Citi
435     4.90     1.1%     15.0
ClearView Economics           ---      4.55     ---      ---
Commerzbank AG                 420     4.90     0.6%     23.0
Credit Agricole CIB           ---      4.80     ---      22.0
Credit Suisse                  425     4.95     0.6%     ---
Daiwa Securities America      ---      4.85     0.6%     ---
Danske Bank                   ---      4.96     ---      20.0
DekaBank                      ---      5.00     0.6%     24.0
Desjardins Group               428     4.80     0.6%     14.0
Deutsche Bank Securities       415     4.75     1.1%     18.5
Deutsche Postbank AG          ---      ---      0.5%     ---DZ
Bank                       ---      4.80     0.5%     23.0
Exane                         ---      4.90     ---      16.0
Fact & Opinion Economics       410     4.90     0.9%     25.0
First Trust Advisors           424     4.97     1.2%     22.4
Goldman, Sachs                ---      5.06     0.5%     18.0
Helaba                         415     4.70     0.6%     18.0
High Frequency Economics       400     5.00     0.5%     ---HSBC
Markets                   415     4.95     ---      19.0
Hugh Johnson Advisors         ---      4.50     0.5%     25.0
Ibersecurities                ---      ---      0.9%     23.0
IDEAglobal                     425     4.75     0.6%     22.0
IHS Global Insight            ---      4.84     ---      ---
Informa Global Markets        ---      5.05     0.4%     19.0
ING Financial Markets         ---      5.05     ---      ---
Insight Economics              425     4.75     0.6%     20.0
Intesa-SanPaulo               ---      4.87     ---      23.0
J.P. Morgan Chase              420     4.85     ---      20.0
Janney Montgomery Scott       ---      4.78     0.7%     ---
Jefferies & Co.                425     ---      ---      18.0
Landesbank Berlin              410     4.93     0.9%     20.0
Landesbank BW                  412     4.82     0.7%     20.0
Manulife Asset Management      430     4.75     ---      ---
Maria Fiorini Ramirez          430     4.95     0.6%     ---MF
Global                      420     4.95     0.6%     21.0
Mizuho Securities              410     4.73     0.5%     21.0
Moody’s Analytics              430     5.07     0.8%     22.0
Morgan Keegan & Co.           ---      ---      0.5%     ---
Morgan Stanley & Co.           420     4.80     0.6%     ---
National Bank Financial       ---      4.80     ---      ---
Natixis                       ---      4.89     ---      ---
Nomura Securities Intl.       ---      4.57     ---      18.5
Nord/LB                        430     ---      0.6%     ---OSK
Group/DMG                 ---      4.83     ---      ---Pierpont
Securities LLC        420     4.85     ---      ---PNC Bank
---      4.75     0.5%     ---Raymond James                 ---
4.71     0.7%     ---Scotia Capital                 430     4.80
---      23.0
Societe Generale               420     5.04     ---      18.3
Standard Chartered             410     4.84     ---      24.0
State Street Global Markets    434     4.89     0.7%     20.7
Stone & McCarthy Research      420     4.90     1.0%     20.8
TD Securities                  420     4.95     0.5%     19.0
Thomson Reuters/IFR            462     5.00     0.8%     18.5
UBS                            420     4.90     0.6%     22.0
UniCredit Research            ---      4.90     0.8%     --- University of Maryland         410     4.96     0.4%     24.5
Wells Fargo & Co.             ---      4.93     0.7%     ---
WestLB AG                     ---      4.80     0.7%     21.0
Westpac Banking Co.            440     4.73     0.6%     15.0
Wrightson ICAP                 420     4.95     1.0%     18.0
==============================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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

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