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
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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%
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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
Purchases of New Homes in U.S. Probably Rebounded in July
Ty Wright/Bloomberg
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.
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. Photographer: Ty Wright/Bloomberg
Aug. 22 (Bloomberg) -- Michelle Meyer, a senior economist at Bank of America Merrill Lynch, talks about the outlook for the U.S. housing market. Meyer speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)
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