Sales of New U.S. Homes Probably Stagnated in June as Industry Languished

Photographer: Jim R. Bounds/Bloomberg

A carpenter cuts vinyl siding for a new home under construction in Raleigh, North Carolina, U.S. Builders have little incentive to start projects as the prospect of more distressed properties entering the foreclosure pipeline depresses home values. Close

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Photographer: Jim R. Bounds/Bloomberg

A carpenter cuts vinyl siding for a new home under construction in Raleigh, North Carolina, U.S. Builders have little incentive to start projects as the prospect of more distressed properties entering the foreclosure pipeline depresses home values.

Purchases of new U.S. homes probably stagnated in June, indicating housing is still languishing two years into the economic recovery, economists said before a report today.

Sales ran at a 320,000 annual pace last month after a 319,000 rate the prior month, economists surveyed by Bloomberg News forecast the Commerce Department will report. Home prices declined from a year earlier and consumer confidence fell in July to a nine-month low, other data may show.

Builders have little incentive to start projects as the prospect of more distressed properties entering the foreclosure pipeline depresses home values. The figures underscore Federal Reserve Chairman Ben S. Bernanke’s comments that demand for homes has been held back by slow job growth and restrained consumer optimism.

“Sales will remain weak, not only this year but well into next year,” Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York, said before the report. “The outlook for housing is rather bleak.”

The Commerce Department’s data are due at 10 a.m. in Washington. The median estimate in the Bloomberg survey was based on a poll of 71 economists. Forecasts ranged from 300,000 to 342,000. Sales last year totaled 323,000, the fewest since record-keeping began.

The S&P/Case-Shiller index of property values in 20 cities fell 4.5 percent in May from a year earlier, the biggest 12- month drop since November 2009, according to the median projection in a Bloomberg survey. Compared with a month earlier, home prices may be little changed.

Previously Owned Homes

Competition from cheaper previously owned homes is hurting sales of new dwellings. Distressed properties, which include foreclosures and short-sales, have made up about 33 percent of all existing-home sales since late 2008, according to the National Association of Realtors.

The ailing housing market is taking a toll on shares. The Standard & Poor’s Supercomposite Homebuilders Index is down 3 percent so far this year, compared with a 6.3 percent gain for the S&P 500 Index.

Limited job growth and unemployment above 9 percent for three straight months are keeping housing depressed even with mortgage rates close to record lows and lower prices. The National Association of Realtors index of housing affordability is close to a record high.

“Residential construction activity remains at an extremely low level,” Bernanke said in July 13 testimony to Congress. “The demand for homes has been depressed by many of the same factors that have held down consumer spending more generally, including the slowness of the recovery in jobs and income as well as poor consumer sentiment.”

Consumer Confidence

The Conference Board’s consumer confidence index fell to 56 in July from 58.5 the prior month, according to the median projection before the New York group’s 10 a.m. report.

National Association of Realtors figures on July 20 showed sales of previously owned homes dropped in June to a seven-month low. Existing-home inventories rose to 3.77 million, and it would take 9.5 months, the longest since November, to sell those properties at the current sales pace.

More homes could end up as part of a growing inventory. A total of 6.35 million homeowners weren’t current on their loans at the end of May, with 2.16 million in the process of foreclosure, according to data from Lender Processing Services Inc., a Jacksonville, Florida-based provider of mortgage- processing services and data.

Hovnanian Enterprises Inc. (HOV), the largest homebuilder in New Jersey, posted a wider loss in the first quarter than a year earlier and does not foresee a rapid pickup in the market, the Red Bank, New Jersey-based company said June 7.

“Our internal business plan assumes market conditions do not improve until 2013, and even then, we only assume a modest sales pace improvement and no home-price improvements,” Ara Hovnanian, chairman and chief executive officer of Hovnanian, said on a June 8 conference call.

                        Bloomberg Survey

================================================================
                         Case Shil Consumer New Home New Home
                           Monthly     Conf    Sales    Sales
                              YOY%    Index   ,000’s     MOM%
================================================================

Date of Release              07/26    07/26    07/26    07/26
Observation Period             May     July     June     June
----------------------------------------------------------------
Median                       -4.5%     56.0      320     0.3%
Average                      -4.5%     56.0      320     0.3%
High Forecast                -3.5%     60.0      342     7.2%
Low Forecast                 -5.2%     50.0      300    -6.0%
Number of Participants          32       72       71       71
Previous                     -4.0%     58.5      319    -2.1%
----------------------------------------------------------------
4CAST                        -4.0%     56.0      310    -2.8%
ABN Amro                      ---      56.0      321     0.5%
Action Economics              ---      57.0      310    -2.8%
Aletti Gestielle              ---      54.0      330     3.5%
Ameriprise Financial          ---      57.5      315    -1.3%
Banesto                      -4.7%     58.3      322     0.9%
Bantleon Bank AG              ---      54.0      330     3.5%
Barclays Capital             -5.1%     57.0      321     0.6%
Bayerische Landesbank         ---      57.5     ---      ---
BBVA                         -4.4%     57.9      332     4.1%
BMO Capital Markets          -4.5%     56.0      309    -3.1%
BofA Merrill Lynch           -4.5%     57.0      305    -4.4%
Briefing.com                 -4.2%     55.0      300    -6.0%
Capital Economics            -4.5%     55.0      320     0.3%
CIBC World Markets            ---      ---       322     0.9%
Citi                          ---      56.5      325     1.9%
ClearView Economics           ---      57.0      330     3.5%
Commerzbank AG               -4.5%     55.0      325     1.9%
Credit Agricole CIB           ---      57.0      319     0.0%
Credit Suisse                -4.4%     50.0      320     0.3%
Daiwa Securities America      ---      55.0      310    -2.8%
DekaBank                      ---      56.0      340     6.6%
Desjardins Group             -4.6%     58.5      300    -6.0%
Deutsche Bank Securities     -4.0%     54.0      325     1.9%
Deutsche Postbank AG          ---      53.0     ---      ---
Exane                         ---      57.0      315    -1.3%
Fact & Opinion Economics     -3.5%     53.0     ---      ---
First Trust Advisors          ---      54.6      325     1.9%
FTN Financial                 ---      54.0      317    -0.6%
Goldman, Sachs & Co.          ---      54.5      313    -2.0%
Helaba                        ---      57.0      320     0.3%
High Frequency Economics      ---      53.0     ---      ---
HSBC Markets                 -4.6%     55.5      330     3.5%
Hugh Johnson Advisors         ---      56.9      310    -2.8%
IDEAglobal                   -4.2%     55.0      330     3.5%
IHS Global Insight           -4.7%     59.3      319     0.0%
Informa Global Markets        ---      57.0      310    -2.8%
ING Financial Markets        -4.8%     56.0      329     3.1%
Insight Economics            -4.5%     58.0      310    -2.8%
Intesa-SanPaulo               ---      60.0      305    -4.4%
J.P. Morgan Chase            -4.4%     55.5      315    -1.3%
Janney Montgomery Scott      -5.2%     58.0      330     3.5%
Jefferies & Co.               ---      56.0      325     1.9%
Landesbank Berlin             ---      60.0      325     1.9%
Landesbank BW                -4.3%     53.5      325     1.9%
Manulife Asset Management     ---      57.0      325     1.9%
Market Securities            -4.5%     ---       313    -1.9%
MET Capital Advisors          ---      ---       310    -2.8%
MF Global                    -4.4%     55.5      315    -1.3%
Moody’s Analytics             ---      56.0      330     3.5%
Morgan Keegan & Co.           ---      ---       325     1.9%
Morgan Stanley & Co.          ---      56.0      300    -6.0%
National Bank Financial      -4.7%     60.0      325     1.9%
Natixis                      -5.0%     60.0      315    -1.3%
Nomura Securities            -4.4%     55.2      330     3.5%
OSK Group/DMG                 ---      ---       310    -2.8%
Parthenon Group               ---      56.4      323     1.3%
Pierpont Securities           ---      56.0      330     3.5%
PineBridge Investments        ---      55.0      316    -1.0%
PNC Bank                      ---      60.0      325     1.9%
Raiffeisenbank International  ---      55.0     ---      ---
Raymond James                 ---      54.0      320     0.3%
RBC Capital Markets           ---      55.0      310    -2.8%
RBS Securities                ---      54.0      330     3.5%
Scotia Capital               -4.6%     ---       318    -0.3%
Societe Generale              ---      52.7      342     7.2%
Standard Chartered           -4.4%     54.0      320     0.3%
State Street Global Markets  -4.5%     56.3      314    -1.6%
Stone & McCarthy Research     ---      58.0      325     1.9%
TD Securities                 ---      56.0      330     3.5%
UBS                           ---      52.0      325     1.9%
UniCredit Research           -4.0%     53.0     ---      ---
Union Investment              ---      59.0     ---      ---
University of Maryland       -4.7%     57.0      315    -1.3%
Wells Fargo & Co.             ---      55.0      330     3.5%
WestLB AG                    -5.0%     58.0      322     0.9%
Westpac Banking Co.           ---      56.0      319     0.0%
Wrightson ICAP                ---      57.0      315    -1.3%
================================================================

To contact the reporters 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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