Pending Sales of U.S. Existing Homes Likely Fell in June
The number of contracts to buy previously owned U.S. homes probably fell in June for a second time in three months, a sign the housing market is straining to regain its footing two years into the expansion, economists said before a report today.
A 2 percent decrease is projected after an 8.2 percent gain the prior month, according to the median forecast in a Bloomberg News survey of economists before the National Association of Realtors report. Separate figures may show jobless claims fell last week.
“Housing has continued to bounce along the bottom of the ranges,” said Sean Incremona, a senior economist at 4Cast Inc. in New York. “Considering the soft demand, we see it settling lower again.”
Unemployment above 9 percent and an expanding pipeline of foreclosures mean it may take years to clear the overhang of housing inventory, keeping a lid on the industry that caused the recession. The prospect of contract cancellations due to stricter underwriting standards and low appraisals means some signings may not translate into closings.
The National Association of Realtors will report the sales numbers at 10 a.m. in Washington. Estimates for pending home sales ranged from a drop of 5 percent to an increase of 8 percent, according to 39 forecasts in the Bloomberg survey.
Falling home prices are weighing on consumer confidence and keeping a lid on purchases. 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, the group reported this week.
Builder Shares
The lack of improvement helps explain why homebuilder shares are underperforming the overall market. The Standard & Poor’s 500 Homebuilding Index has declined 6.9 percent this year, compared with a 3.8 percent gain in the broader S&P 500 Index.
Another Realtors’ report on July 20 showed sales of previously owned homes, which make up about 95 percent of the market, dropped in June to a seven-month low. Purchases decreased 0.8 percent to a 4.77 million annual rate. Cancellations jumped to 16 percent from 4 percent the prior month.
The increase in cancellations is partly due to home appraisals that are coming in lower than the values listed on contracts, according to the agents’ group. As banks respond by reducing the amount they’re willing to lend for the purchase, it “causes the deal to unravel,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
Pending sales track contract signings while previously owned sales reflect the closings a month or two later.
Distressed Sales
Distressed deals, composed of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for about 30 percent of the total of closings in June.
Existing-home sales have fallen since reaching an annual peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that led to an 18-month recession. Purchases slumped to a 13-year low of 4.91 million last year.
Sales of existing homes have been driven by investor cash purchases of distressed properties since the downturn. Unemployment at 9.2 percent and stricter lending standards are making it harder for most Americans to take advantage of mortgage rates that are close to a record low.
Initial jobless claims fell to 415,000 last week from 418,000, according to the median projection in a Bloomberg survey of economists before the Labor Department’s 8:30 a.m. report. First-time filings for unemployment benefits, which stood at 418,000 at the end of 2010, have failed to show improvement.
Foreclosure Pipeline
Lender delays in processing home-loan defaults, while crimping current distressed transactions, will push as many as 1 million U.S. foreclosures from this year into 2012 or beyond, casting an “ominous shadow” on the housing market, RealtyTrac Inc., a housing data provider, said this month. A clogged foreclosure pipeline may prevent real estate prices from finding a bottom.
“Supply is a foregone conclusion to stay high for the next couple of years as foreclosure inventory continues to be there on the resale market,” Richard Dugas, chief executive officer at Pulte Group Inc. (PHM), the biggest U.S. homebuilder, said in a teleconference last month. “We’re not predicting that it gets better anytime soon.”
Bloomberg Survey
====================================================
Initial Cont. Pending
Claims Claims Homes
,000’s ,000’s MOM%
====================================================
Date of Release 07/28 07/28 07/28
Observation Period 23-Jul 16-Jul June
----------------------------------------------------
Median 415 3700 -2.0%
Average 416 3697 -0.9%
High Forecast 440 3720 8.0%
Low Forecast 400 3674 -5.0%
Number of Participants 44 15 39
Previous 418 3698 8.2%
----------------------------------------------------
4CAST 425 --- -3.2%
ABN Amro 410 --- 1.0%
Action Economics 405 3700 ---
Aletti Gestielle 410 --- ---
Ameriprise Financial 410 3680 -2.6%
Banesto --- --- -2.0%
Barclays Capital 415 --- -2.5%
BBVA 415 3705 0.0%
BMO Capital Markets 410 --- -2.0%
BNP Paribas 425 --- ---
BofA Merrill Lynch 410 --- -3.0%
Briefing.com 440 3700 -3.5%
Capital Economics --- --- 2.5%
Citi 410 3700 ---
ClearView Economics --- --- 7.5%
Commerzbank AG 415 --- -2.0%
Credit Suisse 430 --- ---
DekaBank --- --- -1.0%
Desjardins Group 410 --- ---
Deutsche Bank Securities --- --- -2.0%
Fact & Opinion Economics 415 --- 8.0%
First Trust Advisors 415 --- ---
Helaba 415 --- ---
High Frequency Economics --- --- 0.0%
HSBC Markets 430 --- ---
IDEAglobal 410 --- -2.0%
Informa Global Markets 420 3710 -3.5%
ING Financial Markets 415 3690 -3.0%
Insight Economics 410 3675 -3.0%
J.P. Morgan Chase 415 --- -2.0%
Janney Montgomery Scott --- --- -1.0%
Jefferies & Co. 400 --- ---
Landesbank Berlin 410 --- ---
Landesbank BW --- --- -0.5%
Manulife Asset Management 405 3700 ---
Maria Fiorini Ramirez 425 --- ---
Market Securities --- --- 3.5%
MF Global 420 --- -1.0%
Moody’s Analytics 415 3700 1.0%
Parthenon Group 403 --- -0.7%
Pierpont Securities 420 --- ---
PineBridge Investments 402 --- 0.0%
RBC Capital Markets 420 --- -5.0%
RBS Securities 410 --- ---
Scotia Capital 410 3700 -2.0%
Societe Generale 436 3674 3.5%
Standard Chartered 412 --- -3.0%
State Street Global Markets 420 3708 -2.4%
Stone & McCarthy Research 430 --- ---
TD Securities 410 3700 2.0%
UBS 410 --- -2.0%
University of Maryland 420 --- 0.0%
WestLB AG --- --- -2.5%
Westpac Banking Co. --- --- -4.0%
Wrightson ICAP 425 3720 -3.0%
====================================================
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
Pending Sales of U.S. Existing Homes Likely Fell in June
Derick E. Hingle/Bloomberg
A For Sale sign is shown in Hammond, Louisiana.
A For Sale sign is shown in Hammond, Louisiana. Photographer: Derick E. Hingle/Bloomberg
July 28 (Bloomberg) -- David Resler, chief economist at Nomura Securities International Inc., talks about the congressional stalemate over the U.S. debt ceiling and the possible impact a default would have on the economy. Resler speaks with Deirdre Bolton, Matt Miller and Juliana Goldman on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Pending Sales of U.S. Existing Homes Probably Fell in June
Paul Taggart/Bloomberg
A for sale sign is displayed in the yard of a home in East Hampton, New York, U.S.
A for sale sign is displayed in the yard of a home in East Hampton, New York, U.S. Photographer: Paul Taggart/Bloomberg
Rate this Page
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.