Sales of New U.S. Homes Probably Rose in February After Slump in January

A projected February increase in sales of U.S. new homes probably failed to make up for the ground lost the prior month, adding to evidence the industry is floundering, economists said before a report today.

Purchases, tabulated when contracts are signed, climbed 2.1 percent to a 290,000 annual pace after slumping 13 percent in January, according to the median estimate in a Bloomberg News survey of 77 economists. Even with the gain, sales are close to the record-low 274,000 pace reached in August.

Builders are struggling to compete with existing homes as foreclosures add to the overhang of unsold properties and drive down prices. The figures underscore the Federal Reserve’s view that the housing market “continues to be depressed” even as the rest of the economy improves.

“This is the bouncing-a-long-the-bottom scenario,” Julia Coronado, chief economist for North America at BNP Paribas in New York. “We’re seeing the flood of existing homes coming onto the market, really sapping demand for new homes. The new-home and the whole construction picture looks very vulnerable.”

The Commerce Department report is due at 10 a.m. in Washington. Economists’ forecasts ranged from 240,000 to 325,000, following a 284,000 rate in January.

Previously owned home purchases dropped more than forecast in February, figures from the National Association of Realtors showed this week. The median home price fell to a 9-year-low, while the supply of unsold properties rose.

Leading Gauge

New-home sales are considered a more timely barometer than purchases of previously owned homes, which account for about 90 percent of the housing market. Existing-home purchases are calculated when a contract closes.

Builders are putting off new construction as inventory swells. Housing starts fell in February to a 479,000 annual rate, the lowest level since April 2009, and construction permits slumped to a record low, Commerce Department figures showed last week.

Homebuilder shares have underperformed the broader stock market in the last year. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders has declined 9.3 percent in the 12 months ended yesterday, compared with an 11 percent increase for the broader S&P 500.

Hovnanian Enterprises Inc. (HOV), the largest homebuilder in New Jersey, reported on March 1 a first-quarter loss after a drop in sales and the absence of a tax benefit that boosted results a year earlier. The loss was $64.1 million, or 82 cents a share, for the quarter ended Jan. 31, the Red Bank-based company said in a statement.

Jobs Needed

“We need confidence to go up,” Chief Executive Officer Ara Hovnanian said March 2 during a call with analysts. “We need employment numbers to get better, and I think that’ll attract traffic as well as customers.”

While signs such as stronger manufacturing and exports indicate the world’s largest economy is gaining momentum, Fed Chairman Ben S. Bernanke and his fellow policy makers reaffirmed plans to buy $600 billion of Treasuries through June to “promote a stronger recovery” after their second meeting of the year on March 15.

Bernanke told Congress during a March 2 testimony that until more people want homes, “there’s no demand for construction to build houses and so the construction industry is quite reduced.”

                       Bloomberg Survey

===========================================
                          New Home New Home
                             Sales    Sales
                            ,000’s     MOM%
===========================================

Date of Release              03/23    03/23
Observation Period            Feb.     Feb.
-------------------------------------------
Median                         290     2.1%
Average                        291     2.5%
High Forecast                  325    14.4%
Low Forecast                   240   -15.5%
Number of Participants          77       77
Previous                       284   -12.6%
-------------------------------------------
4CAST Ltd.                     290     2.1%
ABN Amro                       295     3.9%
Action Economics               295     3.9%
Aletti Gestielle SGR           300     5.6%
Ameriprise Financial           300     5.6%
Banesto                        304     7.0%
Bank of Tokyo- Mitsubishi      281    -1.1%
Bantleon Bank AG               290     2.1%
Barclays Capital               289     1.8%
BBVA                           297     4.6%
BMO Capital Markets            301     6.0%
BNP Paribas                    290     2.1%
BofA Merrill Lynch             295     3.9%
Briefing.com                   275    -3.2%
Capital Economics              300     5.6%
CIBC World Markets             295     3.9%
Citi                           300     5.6%
ClearView Economics            300     5.6%
Commerzbank AG                 285     0.4%
Credit Agricole CIB            296     4.2%
Credit Suisse                  270    -4.9%
Daiwa Securities America       290     2.1%
Danske Bank                    281    -1.0%
DekaBank                       290     2.1%
Desjardins Group               285     0.4%
Deutsche Bank Securities       310     9.2%
DZ Bank                        290     2.1%
Exane                          300     5.6%
Fact & Opinion Economics       300     5.6%
First Trust Advisors           286     0.7%
FTN Financial                  298     4.9%
Goldman, Sachs                 298     5.0%
Helaba                         300     5.6%
High Frequency Economics       325    14.4%
HSBC Markets                   300     5.6%
Hugh Johnson Advisors          300     5.6%
IDEAglobal                     300     5.6%
IHS Global Insight             284     0.0%
Informa Global Markets         293     3.2%
ING Financial Markets          290     2.1%
Insight Economics              290     2.1%
Intesa-SanPaulo                295     3.9%
J.P. Morgan Chase              290     2.1%
Janney Montgomery Scott        280    -1.4%
Jefferies & Co.                297     4.6%
Landesbank Berlin              260    -8.5%
Landesbank BW                  290     2.1%
Maria Fiorini Ramirez          290     2.1%
MET Capital Advisors           280    -1.4%
MF Global                      280    -1.4%
Mizuho Securities              278    -2.0%
Moody’s Analytics              290     2.1%
Morgan Keegan & Co.            284     0.0%
Morgan Stanley & Co.           290     2.1%
National Bank Financial        285     0.4%
Natixis                        290     2.1%
Nomura Securities Intl.        305     7.4%
OSK Group/DMG                  297     4.6%
Parthenon Group                288     1.4%
Pierpont Securities            290     2.1%
PineBridge Investments         277    -2.5%
PNC Bank                       290     2.1%
Raymond James                  305     7.4%
RBC Capital Markets            280    -1.4%
RBS Securities                 300     5.6%
Scotia Capital                 294     3.5%
Societe Generale               240   -15.5%
Standard Chartered             290     2.1%
State Street Global Markets    289     1.8%
Stone & McCarthy Research      290     2.1%
TD Securities                  315    10.9%
UBS                            285     0.4%
University of Maryland         295     3.9%
Wells Fargo                    285     0.4%
WestLB AG                      300     5.6%
Westpac Banking Co.            284     0.0%
Wrightson ICAP                 285     0.4%
===========================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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

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