Home Prices in U.S. Probably Kept Falling as Housing Absent From Recovery

U.S. home prices probably slumped in March by the most in 16 months, indicating residential real estate will keep weighing on the expansion, economists said before a report today.

Property values in 20 cities dropped 3.4 percent from March 2010, the biggest year-over-year decline since November 2009, according to the median forecast of 25 economists surveyed by Bloomberg News ahead of a report from S&P/Case-Shiller. Other reports may show manufacturing slowed in May and consumer confidence rose as fuel costs eased.

“Weak demand and a deluge of discounted sales of distressed properties have weighed significantly on prices,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “It’s hard to be enthusiastic about the economy’s prospects as long as house prices are falling.”

A backlog of foreclosures poised to reach the market means prices may stay depressed, dissuading builders from taking on new-home construction projects. The figures come as recent reports on manufacturing and consumer spending show the economy is slowing.

The Case-Shiller report is due at 9 a.m. New York time. Estimates for the year-over-year change in March home prices ranged from declines of 4.9 percent to 2.8 percent. Economists surveyed projected the gauge of residential real-estate values decreased 0.2 percent in March from the prior month, the same as in February, after adjusting for seasonal variations.

The year-over-year gauge provides better indications of trends in prices, the group has said. The panel comprises Karl Case and Robert Shiller, the economists who created the index.

Recession Low

The 20-city gauge fell in February to 139.27, compared with a recession low of 139.26 in April 2009.

Reports earlier this month showed the housing market remains depressed at the same time the rest of the economy has cooled.

Sales of previously owned homes fell 0.8 percent in April to a 5.05 million rate, with distressed sales accounting for 37 percent of the total, the National Association of Realtors said May 19.

Pending sales of previously owned homes plunged 12 percent in April from the prior month, the group said last week. The gauge measures contract signings, which typically lead closings by one to two months.

Builders are gloomy and project housing demand will remain depressed into next year, Bill Wheat, chief financial officer of D.R. Horton Inc., told a housing conference in New York on May 11.

‘Very Weak’

“We still see housing demand at very weak levels,” Wheat said. “We feel like it could still be a struggle in 2012.”

The lack of demand has hurt homebuilding stocks in the last year. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., has dropped 4.3 percent in the 12 months to May 27, while the broader S&P 500 has increased 21 percent.

Job gains and a retreat in gasoline prices were enough to lift consumer confidence in May. The Conference Board’s measure increased to 66.5 from an April reading of 65.4, according to the median estimate of economists surveyed before the 10 a.m. release. The index averaged 53.7 during the December 2007-June 2009 recession and 98 during the prior economic expansion that ended in December 2007.

After surging to $3.99 per gallon nationally on May 4, fuel costs have since moderated. Regular gasoline dropped to $3.81 a gallon on May 26, according to AAA, the nation’s biggest motoring organization.

Cutting Back

As gas prices took a bigger chunk out of household incomes, Americans cut back on less essential goods and services. Wal- Mart Stores Inc. is among retailers that have felt the pinch. Sales at U.S. Wal-Mart stores open at least a year dropped 1.1 percent in the first quarter, the eighth decline in a row, the world’s largest retailer said this month.

Manufacturing, which accounts for 12 percent of the economy, is also cooling, partly because of disruptions in the supply of components made in Japan following the earthquake and tsunami two months ago.

U.S. businesses probably grew at a slower pace in May, a survey may show. The Institute for Supply Management-Chicago Inc.’s barometer dropped to 62 this month from 67.6 in April, according to economists’ forecasts before the 9:45 a.m. release. Figures greater than 50 signal expansion.

                        Bloomberg Survey

================================================================
                         Case Shil Case Shil  Chicago Consumer
                           Monthly  Monthly       PM     Conf
                              MOM%     YOY%    Index    Index
================================================================

Date of Release              05/31    05/31    05/31    05/31
Observation Period           March    March    May      May
----------------------------------------------------------------
Median                       -0.2%    -3.4%     62.0     66.5
Average                      -0.4%    -3.5%     61.9     66.2
High Forecast                 0.0%    -2.8%     67.0     71.0
Low Forecast                 -1.1%    -4.9%     54.0     60.0
Number of Participants          18       25       49       60
Previous                     -0.2%    -3.3%     67.6     65.4
----------------------------------------------------------------
4CAST                         ---     -3.3%     62.5     66.4
ABN Amro                     -0.2%     ---      62.0     67.0
Action Economics              ---      ---      66.0     67.0
Aletti Gestielle SGR          ---      ---      62.5     67.0
Ameriprise Financial          ---      ---      62.0     67.0
Banesto                       ---      ---      63.0     66.9
Barclays Capital             -0.1%    -3.1%     60.0     66.0
Bayerische Landesbank         ---      ---      ---      66.4
BBVA                         -0.9%    -3.8%     64.0     66.0
BMO Capital Markets           ---     -3.5%     63.0     67.0
BNP Paribas                   ---      ---      60.0     67.0
BofA Merrill Lynch            ---     -3.3%     62.0     65.0
Briefing.com                  ---     -3.7%     63.0     67.5
Capital Economics            -0.5%    -3.5%     ---      60.0
Citi                          ---      ---      59.0     66.5
ClearView Economics          -0.2%     ---      60.0     ---
Commerzbank AG                ---     -3.3%     60.0     66.0
Credit Agricole CIB           ---      ---      63.0     66.5
Credit Suisse                -1.1%    -4.8%     60.0     70.0
Daiwa Securities America      ---      ---      ---      65.0
DekaBank                      ---      ---      58.0     66.5
Desjardins Group              ---     -3.2%     61.0     66.9
Deutsche Bank Securities      ---      ---      54.0     67.0
Deutsche Postbank AG          ---      ---      ---      67.0
Exane                         ---      ---      62.0     64.0
First Trust Advisors          ---      ---      67.0     68.9
FTN Financial                 ---      ---      ---      67.0
Helaba                        ---      ---      63.0     66.0
HSBC Markets                 -0.3%     ---      63.0     67.0
IDEAglobal                    ---     -3.6%     63.0     62.0
Informa Global Markets        ---      ---      61.0     66.3
ING Financial Markets        -0.2%    -3.2%     62.0     68.0
Insight Economics             ---     -3.2%     64.0     66.0
Intesa-SanPaulo               ---      ---      62.0     67.0
Janney Montgomery Scott      -0.2%    -3.5%     ---      63.7
Jefferies & Co.               ---      ---      63.0     63.0
Landesbank Berlin             ---      ---      64.0     62.0
Landesbank BW                 ---      ---      63.5     67.5
Moody’s Analytics             ---      ---      64.0     ---
Morgan Stanley & Co.          ---      ---      ---      67.5
Natixis                       ---     -3.5%     ---      71.0
Newedge                       ---      ---      60.0     66.0
Nomura Securities             ---     -4.9%     63.8     ---
Nord/LB                       ---      ---      56.0     ---
Parthenon Group              -0.3%    -3.4%     62.0     ---
Pierpont Securities           ---      ---      ---      68.0
Raiffeisenbank International  ---      ---      ---      62.0
Raymond James                 ---      ---      59.0     64.0
RBC Capital Markets           ---      ---      64.0     66.4
RBS Securities                ---      ---      ---      66.0
Scotia Capital               -0.2%    -3.0%     ---      65.0
SMBC Nikko Securities         0.0%    -2.8%     65.0     65.0
Societe Generale              ---      ---      63.6     64.0
Standard Chartered            ---     -3.8%     ---      65.0
State Street Global Markets  -0.3%    -3.3%     61.4     66.7
Stone & McCarthy Research     ---      ---      59.5     67.5
TD Securities                -0.3%    -3.6%     60.0     67.5
UBS                          -1.0%     ---      58.5     68.5
UniCredit Research            ---     -3.1%     ---      66.5
Union Investment              ---      ---      ---      66.0
University of Maryland       -0.2%    -3.1%     66.9     65.5
Wells Fargo & Co.             ---      ---      ---      66.1
WestLB AG                    -0.8%    -3.6%     64.0     65.8
Westpac Banking Co.           ---      ---      60.0     67.0
Wrightson ICAP               -0.2%     ---      65.0     68.0
================================================================

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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