Sales of New U.S. Homes Probably Fell in July for Third Month

Purchases of new U.S. homes probably fell for a third straight month in July, pointing to lingering housing market weakness two years into the economic recovery, economists said before a report today.

Sales fell 0.6 percent to a 310,000 annual pace, the slowest in four months, from a 312,000 rate in June, according to the median estimate of 75 economists in a Bloomberg News survey. Purchases last year totaled 323,000, the fewest since record-keeping began in 1963.

Builders are less inclined to start new projects as they face competition from cheaper existing homes and the prospect of foreclosures putting more unsold properties on the market. A jobless rate above 9 percent and limited employment growth indicate housing will weigh on the recovery even with mortgage rates at a record low.

“Real estate activity was very quiet through July,” said Robert Dye, chief economist at Comerica Inc. in Dallas. “Households and businesses are very much on recession-watch.”

The Commerce Department’s report is due at 10 a.m. in Washington. Projections in the Bloomberg survey ranged from 290,000 to 325,000.

Distressed properties, which include foreclosures and short-sales, have made up about 33 percent of all existing-home purchases since late 2008, according to the National Association of Realtors.

Sales of previously owned houses, which account for the bulk of the market, fell last month to the slowest pace since November, the NAR reported on Aug. 18. The 3.5 percent decrease reflected an increase in cancelations due to strict lending rules and low appraisals.

Builder Shares

Builder shares reflect an industry that’s struggling to gain momentum. The Standard & Poor’s Supercomposite Homebuilders Index is down 32 percent so far this year, compared with an 11 percent decline for the broader S&P 500 Index.

“The U.S. housing market remains under stress,” Frank Blake, chairman and chief executive officer at Home Depot Inc. (HD), said on an Aug. 16 teleconference with analysts. “We do not expect any meaningful improvement in the housing market for the back half of 2011, and events here and across the globe would suggest that there are more risks to the downside than the upside on GDP growth.”

The home sales figures underscore Federal Reserve Chairman Ben S. Bernanke’s view that the market is hampered by limited job growth and declining consumer confidence.

Bernanke on Housing

“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.”

Bernanke will speak on Aug. 26 at the Kansas City Fed’s annual conference for global central bankers in Jackson Hole, Wyoming. He used the gathering last year to hint at a second round of so-called quantitative easing, in which the Fed purchased $600 billion of Treasuries from November 2010 through June.

Consumer confidence in August plunged to the lowest level since May 1980, according to the Thomson Reuters/University of Michigan preliminary index. Rising pessimism poses a risk household spending will cool further, hindering a recovery that’s shown signs of fatigue.

Declining sentiment, a lack of hiring and limited income are hurdles for a housing market even with mortgage rates at all-time lows. The average on a 30-year fixed-rate mortgage was 4.15 percent in the week ended Aug. 18, down from 4.42 percent in the period a year ago, according to Freddie Mac.

Late Payments

More signs of strain in the housing market emerged yesterday. The percentage of U.S. mortgages overdue by one month rose to the highest level in a year in the second quarter as homeowners who lost jobs were unable to make their payments.

The share of home loans overdue by 30 days rose to 3.46 percent of all mortgages, from 3.35 percent in the first quarter, according to a report today from the Mortgage Bankers Association in Washington. The percentage of mortgages overdue by 60 days increased to 1.37 percent from 1.35 percent, while foreclosures dropped for the second consecutive quarter.

               Bloomberg Survey

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

Date of Release              08/23    08/23
Observation Period            July     July
-------------------------------------------
Median                         310    -0.6%
Average                        311    -0.4%
High Forecast                  325     4.2%
Low Forecast                   290    -7.1%
Number of Participants          75       75
Previous                       312    -1.0%
-------------------------------------------
4CAST                          307    -1.6%
ABN Amro                       310    -0.6%
Action Economics               315     1.0%
Aletti Gestielle               315     1.0%
Ameriprise Financial           316     1.3%
Bantleon Bank AG               300    -3.9%
Barclays Capital               310    -0.6%
BBVA                           305    -2.2%
BMO Capital Markets            310    -0.6%
BNP Paribas                    310    -0.6%
BofA Merrill Lynch             300    -3.9%
Briefing.com                   300    -3.9%
Capital Economics              290    -7.1%
CIBC World Markets             310    -0.6%
Citi                           315     1.0%
ClearView Economics            310    -0.6%
Comerica Inc                   300    -3.9%
Commerzbank AG                 300    -3.9%
Credit Agricole CIB            315     1.0%
Credit Suisse                  315     1.0%
Daiwa Securities America       300    -3.9%
Danske Bank                    307    -1.6%
DekaBank                       315     1.0%
Desjardins Group               300    -3.9%
Deutsche Bank Securities       310    -0.6%
DZ Bank                        315     1.0%
Exane                          315     1.0%
Fact & Opinion Economics       300    -3.9%
First Trust Advisors           312     0.0%
FTN Financial                  315     1.0%
Goldman, Sachs & Co.           318     2.0%
Helaba                         310    -0.6%
Hugh Johnson Advisors          310    -0.6%
IDEAglobal                     320     2.6%
IHS Global Insight             314     0.6%
Informa Global Markets         305    -2.2%
ING Financial Markets          315     1.0%
Insight Economics              315     1.0%
Intesa-SanPaulo                318     1.9%
J.P. Morgan Chase              310    -0.6%
Janney Montgomery Scott        322     3.2%
Jefferies & Co.                310    -0.6%
Landesbank Berlin              320     2.6%
Landesbank BW                  325     4.2%
Manulife Asset Management      305    -2.2%
Maria Fiorini Ramirez          315     1.0%
Market Securities              308    -1.3%
MET Capital Advisors           307    -1.6%
MF Global                      305    -2.2%
Moody’s Analytics              321     2.9%
Morgan Keegan & Co.            310    -0.6%
Morgan Stanley & Co.           315     1.0%
National Bank Financial        310    -0.6%
Natixis                        320     2.6%
Nomura Securities              312     0.0%
OSK Group/DMG                  315     1.0%
Parthenon Group                313     0.3%
Pierpont Securities            320     2.6%
PNC Bank                       320     2.6%
Raymond James                  315     1.0%
RBC Capital Markets            307    -1.6%
RBS Securities                 300    -3.9%
Scotia Capital                 310    -0.6%
SMBC Nikko Securities          315     1.0%
Societe Generale               302    -3.2%
Standard Chartered             302    -3.2%
State Street Global Markets    307    -1.6%
Stone & McCarthy Research      315     1.0%
TD Securities                  300    -3.9%
UBS                            315     1.0%
University of Maryland         316     1.3%
Wells Fargo & Co.              310    -0.6%
WestLB AG                      315     1.0%
Westpac Banking Co.            303    -3.0%
Wrightson ICAP                 315     1.0%
===========================================

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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