Sales of Existing U.S. Homes Likely Fell

Sales of previously owned homes in the U.S. probably declined in October for a second month as falling property values failed to sway buyers, economists said before a report today.

Purchases decreased 2.2 percent last month to a 4.8 million annual rate, according to the median forecast of 65 economists surveyed by Bloomberg News.

Unemployment hovering around 9 percent, falling appraisals and strict lending rules will probably keep hurting demand even after homes lost 32 percent of their value from the 2006 peak and mortgage rates sank to record lows. The end of a temporary halt on foreclosures stemming from faulty seizures may push more homes on the market and trigger even more price decreases.

“Most people recognize that prices are still coming their way, and there’s no great urgency to go out and buy,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “We’re still in the bottoming out process, so I wouldn’t expect to see big sustained gains any time soon.”

The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ sales estimates ranged from 4.6 million to 5.05 million following September’s 4.91 million pace.

Housing, the industry that induced the recession, is still struggling to stabilize as home prices slump. The median value of an existing house fell 3.5 percent in September from a year earlier to $165,400, according to NAR data. The value plunged from a July 2006 record of $230,300 to a low of $156,100 in February.

More Foreclosures

A growing glut of seized properties threatens to drag prices down further. In the third quarter, U.S. lenders started foreclosures on more homes, the first increase in a year, as bank moratoriums that clogged the pipeline dissipated. There were 3.48 million previously owned homes for sale in September, above levels before the recession began in 2007.

Sliding prices and growing unemployment have discouraged household formation and left some people with loans that prevent them from boosting outlays on other goods and services. With the housing market weighing on growth, Federal Reserve officials have called for more accommodative policy.

Fed Bank of New York President William C. Dudley said last week that if the central bank opted to purchase more bonds to lower interest rates and stimulate the economy, “it might make sense” for much of those to consist of mortgage-backed securities, which would have a “greater direct impact on the housing market.”

More Stable

A few signs point to stabilization in housing. Builders broke ground on more homes than forecast in October and construction permits climbed to the highest level since March 2010, Commerce Department figures showed Nov. 17. The National Association of Home Builders/Well Fargo index of builder confidence rose to 20 in November, the highest level since May 2010. Readings below 50 mean more respondents said conditions were poor.

“Sales were generated in spite of a near total lack of consumer confidence caused by a litany of factors, including capital markets volatility, stubbornly high unemployment, depressed home prices and an extremely difficult mortgage origination environment,” Allan Merrill, chief executive officer of Beazer Homes USA Inc. (BZH), said during a Nov. 15 call with analysts. New-home sales for the Atlanta-based company’s fiscal 2011 rose 30 percent from a year earlier, he said.

Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders has declined 14 percent since June 30, 2010, compared with an almost 17 percent increase for the broader S&P 500 Index.

              Bloomberg Survey
===========================================
                             Exist    Exist
                             Homes    Homes
                              Mlns     MOM%
===========================================
Date of Release              11/21    11/21
Observation Period            Oct.     Oct.
-------------------------------------------
Median                        4.80    -2.2%
Average                       4.81    -2.1%
High Forecast                 5.05     2.9%
Low Forecast                  4.60    -6.3%
Number of Participants          65       65
Previous                      4.91    -3.0%
-------------------------------------------
4CAST                         4.80    -2.2%
ABN Amro                      4.81    -2.0%
Action Economics              4.80    -2.2%
Ameriprise Financial          4.90    -0.2%
Banca Aletti                  4.85    -1.2%
Banesto                       4.80    -2.2%
Barclays Capital              4.79    -2.4%
BMO Capital Markets           4.80    -2.2%
BNP Paribas                   4.70    -4.3%
BofA Merrill Lynch            4.80    -2.2%
Briefing.com                  5.00     1.8%
Capital Economics             4.70    -4.3%
CIBC World Markets            4.88    -0.6%
Citi                          4.83    -1.6%
ClearView Economics           5.00     1.8%
Comerica                      4.85    -1.2%
Commerzbank AG                4.70    -4.3%
Credit Agricole CIB           4.80    -2.2%
Credit Suisse                 4.80    -2.2%
Danske Bank                   4.74    -3.5%
DekaBank                      4.70    -4.3%
Desjardins Group              4.70    -4.3%
Deutsche Bank Securities      4.80    -2.2%
DZ Bank                       4.74    -3.5%
Exane                         4.80    -2.2%
First Trust Advisors          4.79    -2.4%
FTN Financial                 4.75    -3.3%
Helaba                        4.80    -2.2%
HSBC Markets                  4.85    -1.2%
IDEAglobal                    4.85    -1.2%
Informa Global Markets        4.74    -3.5%
ING Financial Markets         4.78    -2.7%
Insight Economics             4.90    -0.2%
Intesa-SanPaulo               4.80    -2.2%
J.P. Morgan Chase             4.85    -1.2%
Janney Montgomery Scott       4.90    -0.2%
Jefferies & Co.               5.05     2.9%
Landesbank Berlin             4.80    -2.2%
Landesbank BW                 4.75    -3.3%
Manulife Asset Management     4.85    -1.2%
Maria Fiorini Ramirez         4.85    -1.2%
Moody’s Analytics             4.86    -1.0%
Morgan Stanley & Co.          4.80    -2.2%
National Bank Financial       4.80    -2.2%
Natixis                       4.85    -1.2%
Nomura Securities             4.75    -3.3%
OSK Group/DMG                 4.76    -3.1%
Parthenon Group               4.69    -4.5%
Pierpont Securities           4.80    -2.2%
PNC Bank                      4.95     0.8%
Raiffeisenbank International  4.80    -2.2%
Raymond James                 4.90    -0.2%
RBC Capital Markets           4.70    -4.3%
Scotia Capital                4.76    -3.1%
Societe Generale              4.76    -3.1%
Standard Chartered            4.60    -6.3%
State Street Global Markets   4.79    -2.4%
Stone & McCarthy Research     4.80    -2.2%
TD Securities                 4.79    -2.4%
UBS                           4.78    -2.7%
University of Maryland        4.76    -3.1%
Wells Fargo & Co.             4.78    -2.7%
WestLB AG                     4.90    -0.2%
Westpac Banking Co.           4.77    -3.0%
Wrightson ICAP                4.80    -2.2%
===========================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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

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