Purchases of New Homes in U.S. Probably Rebounded in July

Purchases of new homes in the U.S. probably rose in July for the third time in four months, a sign the industry that helped trigger the recession is recovering, economists said before a report today.

Sales, tabulated when contracts are signed, climbed 4.3 percent to a 365,000 annual pace, according to the median estimate in a Bloomberg survey of 72 economists. Another report may show the number of claims for jobless benefits was little changed last week.

Buyers are returning to the market to take advantage of cheaper properties and record-low mortgage rates, helping to boost orders at builders like Toll Brothers Inc. (TOL) Competition from foreclosures, unemployment exceeding 8 percent and limited credit pose hurdles to a more pronounced rebound, one reason Federal Reserve policy makers are monitoring housing data.

“The housing market has stabilized,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. “People believe the worst is over and it’s a good time to act. Builders will have to increase activity just to keep up with sales.”

The Commerce Department will release the data at 10 a.m. in Washington. Economists’ forecasts ranged from 340,000 to 400,000, following a decline in June to a 350,000 pace.

At 8:30 a.m., the Labor Department may report the number of initial applications for unemployment insurance payments fell by 1,000 to 365,000 last week, according to the Bloomberg survey median. While a decline in firings signals the job market is stabilizing, a pickup in hiring is needed to reduce a jobless rate that has topped 8 percent for 42 consecutive months.

More Timely

Sales of new homes are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. Newly constructed houses accounted for 6.7 percent of the residential market in 2011, down from a high of 15 percent during the boom of the past decade.

Existing-home sales rose to a 4.47 million annual rate in July from an eight-month low the prior month, the National Association of Realtors reported yesterday. Restrictive lending rules, a lack of inventory and lingering unemployment may be preventing a rebound to the 5 million to 5.5 million sales pace that the real-estate group’s said signals a “normal” market.

The NAR figures also showed distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 24 percent of existing-home purchases. The share was less than the prior month and down from 29 percent in July 2011. Of those, 12 percent were foreclosed houses and 12 percent were short sales.

Builder Profits

Companies benefiting from rising demand include Bloomfield Hills, Michigan-based PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, which posted a 32 percent jump in second-quarter orders. Toll, the largest U.S. luxury-home builder, yesterday reported a better-than-estimated profit and an increase in revenue for the fiscal third-quarter.

“We are enjoying the most sustained demand we’ve experienced in over five years,” Douglas Yearley Jr., chief executive officer of the Horsham, Pennsylvania-based company, said in a statement. “Customers who have postponed buying for a number of years are moving into the market.”

Investors also are upbeat about prospects for the industry. The S&P Supercomposite Homebuilding Index (S15HOME) has advanced 60 percent since the beginning of this year, outpacing a 12 percent gain in the broader S&P 500. (SPX)

Mortgage Rates

Borrowing costs continue to aid home buyers. The average rate on a 30-year fixed mortgage dropped to 3.49 percent in the week ended July 26, the lowest in records dating to 1971, according to McLean, Virginia-based Freddie Mac.

Among other signs of improvement, residential construction permits, a proxy for future work, jumped to a four-year high in July. The National Association of Home Builders/Wells Fargo index of builder confidence rose in August to the highest level since 2007.

Fed officials assessed that “conditions in the housing sector appeared to have improved somewhat, but from a very low level,” according to minutes of the central bank’s July 31-Aug. 1 meeting released yesterday.

Many of the policy makers also said additional stimulus would “likely be warranted fairly soon” unless the economy shows signs of a durable pickup, according to the text.

                        Bloomberg Survey
================================================================
                           Initial    Cont. New Home New Home
                            Claims   Claims    Sales    Sales
                            ,000’s   ,000’s   ,000’s     MOM%
================================================================
Date of Release              08/23    08/23    08/23    08/23
Observation Period          18-Aug   11-Aug     July     July
----------------------------------------------------------------
Median                         365     3300      365     4.3%
Average                        366     3304      366     4.5%
High Forecast                  373     3340      400    14.3%
Low Forecast                   355     3275      340    -2.9%
Number of Participants          41       14       72       72
Previous                       366     3305      350    -8.4%
----------------------------------------------------------------
4CAST                          373     ---       360     2.9%
ABN Amro                      ---      ---       357     2.0%
Action Economics               368     3284      370     5.7%
Ameriprise Financial          ---      ---       362     3.4%
Bantleon Bank AG              ---      ---       370     5.7%
Barclays                       365     ---       355     1.4%
BBVA                           363     3295      368     5.1%
BMO Capital Markets            365     3300      366     4.6%
BNP Paribas                    368     ---       360     2.9%
BofA Merrill Lynch             370     ---       365     4.3%
Briefing.com                   365     3300      375     7.1%
Capital Economics             ---      ---       375     7.1%
CIBC World Markets            ---      ---       375     7.1%
Citi                           370     3300      360     2.9%
ClearView Economics           ---      ---       353     0.9%
Comerica                      ---      ---       340    -2.9%
Commerzbank AG                 365     ---       360     2.9%
Credit Agricole CIB           ---      ---       360     2.9%
Credit Suisse                  365     ---       365     4.3%
Daiwa Securities America      ---      ---       360     2.9%
Danske Bank                   ---      ---       362     3.4%
DekaBank                      ---      ---       360     2.9%
Desjardins Group               368     ---       365     4.3%
Deutsche Bank Securities      ---      ---       355     1.4%
DZ Bank                       ---      ---       360     2.9%
Exane                         ---      ---       380     8.6%
First Trust Advisors           364     ---       360     2.9%
FTN Financial                 ---      ---       358     2.3%
Goldman, Sachs & Co.          ---      ---       376     7.5%
Helaba                         365     ---       365     4.3%
High Frequency Economics      ---      ---       375     7.1%
Hugh Johnson Advisors         ---      ---       367     4.9%
IDEAglobal                     360     ---       360     2.9%
IHS Global Insight             365     ---       375     7.1%
Informa Global Markets         370     3315      370     5.7%
ING Financial Markets          360     3300      365     4.3%
Insight Economics              365     3275      365     4.3%
Intesa Sanpaulo               ---      ---       380     8.6%
J.P. Morgan Chase              370     ---       370     5.7%
Janney Montgomery Scott       ---      ---       356     1.7%
Jefferies & Co.               ---      ---       360     2.9%
John Hancock Financial         362     3300      361     3.0%
Landesbank Berlin              365     ---       380     8.6%
Landesbank BW                 ---      ---       370     5.7%
Lloyds Bank                    370     ---       380     8.6%
Maria Fiorini Ramirez          365     ---       370     5.7%
Market Securities             ---      ---       354     1.1%
Mizuho Securities              366     ---       357     2.0%
Moody’s Analytics              365     3320      368     5.1%
Morgan Stanley & Co.          ---      ---       390    11.4%
National Bank Financial       ---      ---       370     5.7%
Natixis                       ---      ---       365     4.3%
Nomura Securities             ---      ---       353     0.9%
Nord/LB                        360     ---      ---      ---
OSK Group/DMG                 ---      ---       367     4.9%
Pierpont Securities            365     ---       360     2.9%
PineBridge Investments         360     ---       378     8.0%
PNC Bank                      ---      ---       400    14.3%
Raymond James                  365     ---       375     7.1%
RBC Capital Markets            367     ---       350     0.0%
RBS Securities                 370     ---       360     2.9%
Regions Financial Corp        ---      ---       368     5.1%
Scotiabank                     365     3325      351     0.1%
SMBC Nikko Securities         ---      ---       360     2.9%
Societe Generale               370     3340      375     7.1%
Southern Polytechnic State     355     ---      ---      ---
Standard Chartered             360     ---       370     5.7%
Stone & McCarthy Research      365     ---       365     4.3%
TD Securities                  369     3300      366     4.6%
UBS                            365     ---       360     2.9%
University of Maryland        ---      ---       360     2.9%
Wells Fargo & Co.             ---      ---       364     4.0%
Westpac Banking Co.            370     ---       371     6.0%
Wrightson ICAP                 370     3300      365     4.3%
================================================================

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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

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