New Home Sales in U.S. Likely Fell in May

Purchases of new houses probably dropped in May for the first time in three months, showing the real-estate market is struggling to gain traction.

Sales decreased 4 percent to a 310,000 annual rate last month, according to the median forecast of 67 economists surveyed by Bloomberg News. Another report may show applications for unemployment insurance benefits were little changed last week.

Builders will have to contend with the prospect that almost 2 million distressed properties will reach the market, which may take years to absorb as the jobless rate hovers around 9 percent. The Federal Reserve yesterday maintained record-low interest rates to spur a recovery that “is continuing at a moderate pace, though somewhat more slowly” than previously expected.

“I find it very hard to be upbeat about the U.S. housing market,” said David Semmens, an economist at Standard Chartered Bank in New York. “People are staying out of the market until prices bottom, which allows prices to fall further because of lower demand.”

The Commerce Department’s report is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from 288,000 to 345,000. A record-low 323,000 new homes were sold last year.

Competition from existing homes selling at discounted prices is hurting builders. The 1.8 million of inventory of distressed homes nationwide would take about three years to sell at the current pace, Daren Blomquist, communications manager at RealtyTrac Inc., said last week.

Existing Homes

Sales of existing homes comprise about 94 percent of the housing market, up from about 85 percent six years ago, as foreclosures and distressed sales lure some buyers.

Stocks of homebuilders have underperformed the broader market. The Standard & Poor’s Supercomposite Homebuilders Index has fallen 1.2 percent so far this year, compared with a 2.3 percent gain for the S&P 500 Index.

The housing market is weighing on other parts of the world’s largest economy, according to some company chiefs.

“We expect the recovery will continue to be slow and uneven, particularly for more moderate-income households,” Gregg Steinhafel, chairman and chief executive of Minneapolis- based Target Corp. (TGT), the second-largest U.S. discount retailer, told investors last month. “These households need to see further improvements in housing and income growth before they’ll have the capacity to meaningfully increase their discretionary spending.”

Jobless Claims

A report from the Labor Department may show employers aren’t reducing the pace of job cuts. Initial jobless claims were little changed last week at 415,000, according to the median estimate in a Bloomberg survey ahead of figures due at 8:30 a.m.

Fed officials yesterday said they will maintain record monetary stimulus to support a flagging economic recovery after completing a $600 billion bond-purchase program as scheduled this month.

“The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected,” the Federal Open Market Committee said in a statement after a two-day meeting in Washington. Fed policy makers reduced their economic-growth projections while raising forecasts for the jobless rate this year and next.

                         Bloomberg Survey
==============================================================
                           Initial    Cont. New Home New Home
                            Claims   Claims    Sales    Sales
                            ,000’s   ,000’s   ,000’s     MOM%
==============================================================

Date of Release              06/23    06/23    06/23    06/23
Observation Period          18-Jun   11-Jun      May      May
--------------------------------------------------------------
Median                         415     3670      310    -4.0%
Average                        414     3671      309    -4.3%
High Forecast                  425     3700      345     6.8%
Low Forecast                   400     3648      288   -10.8%
Number of Participants          47       14       67       67
Previous                       414     3675      323     7.3%
--------------------------------------------------------------
4CAST                          420     ---       295    -8.7%
ABN Amro                       400     ---       313    -3.0%
Action Economics               415     3685      305    -5.6%
Aletti Gestielle               420     ---       315    -2.5%
Ameriprise Financial           418     3665      315    -2.5%
Banesto                       ---      ---       310    -4.0%
Bank of Tokyo- Mitsubishi      410     ---       300    -7.1%
Bantleon Bank AG              ---      ---       300    -7.1%
Barclays Capital               410     ---       312    -3.4%
BBVA                           410     3680      315    -2.5%
BMO Capital Markets            410     ---       300    -7.1%
BNP Paribas                    420     ---       290   -10.2%
BofA Merrill Lynch             420     ---       305    -5.6%
Briefing.com                   425     3700      290   -10.2%
Capital Economics             ---      ---       300    -7.1%
CIBC World Markets            ---      ---       305    -5.6%
Citi                           410     3670      320    -0.9%
ClearView Economics           ---      ---       330     2.2%
Commerzbank AG                 410     ---       320    -0.9%
Credit Suisse                  415     ---       330     2.2%
DekaBank                      ---      ---       310    -4.0%
Deutsche Bank Securities      ---      ---       300    -7.1%
First Trust Advisors           415     ---       333     3.1%
FTN Financial                 ---      ---       300    -7.1%
Goldman, Sachs & Co.          ---      ---       310    -4.0%
Helaba                         420     ---       300    -7.1%
HSBC Markets                   420     ---       290   -10.2%
Hugh Johnson Advisors         ---      ---       300    -7.1%
IDEAglobal                     410     ---       305    -5.6%
Informa Global Markets         420     3680      315    -2.5%
Insight Economics              420     3650      305    -5.6%
J.P. Morgan Chase              415     ---       315    -2.5%
Jefferies & Co.                400     ---       305    -5.6%
Landesbank Berlin              410     ---       305    -5.6%
Landesbank BW                  410     ---       325     0.6%
Manulife Asset Management      410     3670      310    -4.0%
Maria Fiorini Ramirez          410     ---       305    -5.6%
MET Capital Advisors          ---      ---       310    -4.0%
MF Global                      415     ---       295    -8.7%
Mizuho Securities              420     ---       301    -7.0%
Moody’s Analytics              413     3665      310    -4.0%
Morgan Keegan & Co.           ---      ---       331     2.5%
Morgan Stanley & Co.           410     ---       320    -0.9%
National Bank Financial       ---      ---       306    -5.3%
Natixis                       ---      ---       315    -2.5%
Nomura Securities             ---      ---       325     0.6%
Nord/LB                        410     ---      ---      ---
OSK Group/DMG                 ---      ---       309    -4.3%
Parthenon Group                408     ---       305    -5.6%
Pierpont Securities            415     ---       315    -2.5%
PineBridge Investments         405     ---       320    -1.0%
PNC Bank                      ---      ---       310    -4.0%
Raymond James                 ---      ---       310    -4.0%
RBC Capital Markets            410     ---       300    -7.1%
RBS Securities                 410     ---       315    -2.5%
Scotia Capital                 420     3665      300    -7.1%
SMBC Nikko Securities         ---      ---       320    -0.9%
Societe Generale               425     3648      345     6.8%
Standard Chartered             410     ---       312    -3.4%
State Street Global Markets    418     3688      304    -5.9%
Stone & McCarthy Research      420     ---       288   -10.8%
TD Securities                  400     3650      300    -7.1%
UBS                            420     ---       300    -7.1%
University of Maryland         420     ---       300    -7.1%
Wells Fargo & Co.             ---      ---       311    -3.7%
WestLB AG                     ---      ---       315    -2.5%
Westpac Banking Co.            415     ---       301    -7.0%
Wrightson ICAP                 415     3675      310    -4.0%
==============================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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

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