Sales of New U.S. Homes Probably Rose to Two-Year High

Demand for new U.S. homes probably climbed in June to the highest level in two years, economists project a report today will show, another sign the housing market is recovering.

Purchases increased to a 371,000 annual rate, the most since April 2010 and up 0.4 percent from the prior month, according to the median forecast of 74 economists surveyed by Bloomberg News.

Record-low mortgage rates and stabilizing home prices have spurred buyer traffic, even as unemployment and strict lending standards remain obstacles. Federal Reserve Chairman Ben S. Bernanke is among those who say the housing market is one part of the economy that is improving as other areas cool.

“Some positive developments have unfolded in recent months, but nevertheless, the sector is merely inching ahead rather than surging,” Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York, said in a note to clients before the report. “On the positive side, the buying environment has improved considerably.”

The report from the Commerce Department is due at 10 a.m. in Washington. Economists’ forecasts ranged from 345,000 to 380,000.

Builders broke ground on 760,000 houses last month at an annual pace, up 6.9 percent from May and the fastest rate in almost four years, the Commerce Department reported last week.

Less Pessimism

The National Association of Home Builders/Wells Fargo confidence index climbed 6 points this month, the biggest gain since September 2002, to 35, another report last week showed. Nonetheless, readings less than 50 signal mean more respondents said conditions were poor.

Growth in construction and the “historically low mortgage rates” are among “modest signs” of a housing recovery, even as some buyers show concern about personal finances and the broader economy and have difficulty meeting lending standards, Bernanke told the Senate Banking Committee last week.

The average rate on a 30-year fixed mortgage loan dropped to 3.53 percent last week, the lowest in data going back to 1972, according to Freddie Mac.

“We are seeing different improvements in different parts of the country, but we’re seeing improvement everywhere,” Larry Nicholson, president and chief executive officer at West Lake Village, California-based builder Ryland Group Inc. (RYL), said on a June 13 conference call. “So that’s the key there.”

Builder shares have outperformed the wider market this year. The Standard & Poor’s Supercomposite Homebuilder Index (S15HOME) has climbed 46 percent this year through yesterday, compared with a 6.4 percent gain for the broader S&P 500.

Economic Growth

Residential construction hasn’t contributed to economic growth over the course of an entire year since 2005, when it accounted for 0.4 percentage point of the 3.1 percent increase in gross domestic product. From 2006 through 2009, the homebuilding slump subtracted 0.8 percent point from growth on average. The declines diminished over the past two years.

Newly constructed houses made up 6.7 percent of the residential market last year, down from a high of 15 percent during the boom of the past decade.

Sales of existing homes unexpectedly declined in June to an eight-month low, the National Association of Realtors reported last week, as banks maintained stricter lending standards.

More purchases of higher-priced properties helped drive up the median price of a previously owned house by 7.9 percent from the same time last year, the biggest 12-month gain since February 2006, the group said.

              Bloomberg Survey

===========================================
                          New Home New Home
                             Sales    Sales
                            ,000’s     MOM%
===========================================
Date of Release              07/25    07/25
Observation Period            June     June
-------------------------------------------
Median                         371     0.4%
Average                        369     0.1%
High Forecast                  380     3.0%
Low Forecast                   345    -6.5%
Number of Participants          74       74
Previous                       369     7.6%
-------------------------------------------
4CAST                          355    -3.8%
ABN Amro                       369     0.0%
Action Economics               360    -2.4%
Ameriprise Financial           372     0.8%
Analytical Synthesis           377     2.2%
Banca Aletti                   355    -3.8%
Bank of Tokyo-Mitsubishi       380     3.0%
Bantleon Bank AG               375     1.6%
Barclays                       360    -2.4%
BBVA                           373     1.1%
BMO Capital Markets            358    -3.0%
BNP Paribas                    360    -2.4%
BofA Merrill Lynch             370     0.3%
Briefing.com                   375     1.6%
Capital Economics              375     1.6%
CIBC World Markets             360    -2.4%
Citi                           375     1.6%
ClearView Economics            360    -2.4%
Comerica                       369     0.0%
Commerzbank AG                 375     1.6%
Credit Agricole CIB            360    -2.4%
Credit Suisse                  375     1.6%
Daiwa Securities America       370     0.3%
Desjardins Group               380     3.0%
Deutsche Bank Securities       345    -6.5%
DZ Bank                        360    -2.4%
First Trust Advisors           363    -1.6%
FTN Financial                  350    -5.2%
Goldman, Sachs & Co.           377     2.0%
Helaba                         370     0.3%
High Frequency Economics       377     2.2%
HSBC Markets                   378     2.4%
Hugh Johnson Advisors          363    -1.6%
IDEAglobal                     360    -2.4%
IHS Global Insight             375     1.6%
Informa Global Markets         365    -1.1%
ING Financial Markets          372     0.8%
Insight Economics              370     0.3%
Intesa Sanpaulo                375     1.6%
J.P. Morgan Chase              370     0.3%
Janney Montgomery Scott        377     2.2%
Jefferies & Co.                365    -1.1%
John Hancock Financial         371     0.6%
Landesbank Berlin              380     3.0%
Landesbank BW                  350    -5.2%
Lloyds Bank                    370     0.3%
Maria Fiorini Ramirez          365    -1.1%
Market Securities              374     1.4%
MET Capital Advisors           375     1.6%
Mizuho Securities              358    -3.0%
Moody’s Analytics              379     2.7%
Morgan Stanley & Co.           375     1.6%
National Bank Financial        375     1.6%
Natixis                        375     1.6%
Nomura Securities              379     2.7%
OSK Group/DMG                  370     0.3%
Pierpont Securities            375     1.6%
PineBridge Investments         375     1.5%
PNC Bank                       380     3.0%
Raymond James                  370     0.3%
RBC Capital Markets            355    -3.8%
RBS Securities                 375     1.6%
Renaissance Macro Research     365    -1.1%
Scotiabank                     368    -0.3%
SMBC Nikko Securities          370     0.3%
Societe Generale               380     3.0%
Standard Chartered             375     1.6%
Stone & McCarthy Research      360    -2.4%
TD Securities                  375     1.6%
UBS                            375     1.6%
University of Maryland         365    -1.1%
Wells Fargo & Co.              373     1.1%
Westpac Banking Co.            377     2.0%
Wrightson ICAP                 370     0.3%
===========================================

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

Enlarge image

Purchases of New U.S. Homes Probably Climbed to Two-Year High

Daniel Acker/Bloomberg

A sign stands outside a new home in Pekin, Illinois.

A sign stands outside a new home in Pekin, Illinois. Photographer: Daniel Acker/Bloomberg