Existing-Home Sales in U.S. Probably Rose From Six-Month Low

Existing-Home Sales in U.S. Fell 0.8% in June
Existing-home sales have fallen since reaching an annual peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that helped dragged the U.S. into an 18-month recession. Photographer: Andrew Harrer/Bloomberg

Sales of previously owned U.S. homes probably rose in June from a six-month low as the industry struggled to overcome rising unemployment and foreclosures, economists said before a report today.

Purchases climbed 1.9 percent to a 4.9 million annual rate, according to the median forecast of 71 economists surveyed by Bloomberg News. The pace matches the total sold in 2010 that was the fewest in 13 years.

Stricter lending rules, unemployment above 9 percent and delays in processing foreclosures mean it may take years to reduce the number of distressed properties on the market even as all-cash purchases have recently helped buoy demand. Federal Reserve Chairman Ben S. Bernanke last week said the decline in confidence and lack of job growth that are impeding consumer spending are also keeping real estate “depressed.”

“Housing continues to bounce around the bottom,” said Peter Muoio, principal and chief economist at Maximus Advisors in New York. “We’re not expecting any kind of true upward momentum any time soon. The high inventory of existing homes is going to keep prices suppressed for an extended time.”

The National Association of Realtors will release the figures at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from 4.75 million to 5.2 million.

Existing-home sales have fallen since reaching an annual peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that helped dragged the U.S. into an 18-month recession.

Cash Purchases

Purchases of previously owned homes have been driven by investor cash transactions. In May, cash deals accounted for 30 percent of sales. The Realtors group started tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent.

Job growth that sputtered in May and June, along with tighter bank credit, is also making it difficult for most Americans to take advantage of mortgage rates that are close to a record low.

Lender delays in processing home-loan defaults will push as many as 1 million U.S. foreclosure filings from this year into 2012 or beyond, casting an “ominous shadow” on the housing market, RealtyTrac Inc., a housing data provider, said last week. A clogged foreclosure pipeline may prevent real estate prices from finding a bottom.

Home construction surged last month as better weather helped builders begin work on projects delayed by storms and tornadoes earlier this year.

Better Weather

Housing starts last month unexpectedly climbed 15 percent to a 629,000 rate, the highest in five months, the Commerce Department reported yesterday. Work on multifamily homes rose 30 percent in June from a month earlier, and it was up 100 percent from a year ago as foreclosures turned more Americans into renters.

Competition from existing homes selling at discounted prices is hurting sales of new dwellings. Purchases of new properties were little changed at a 320,000 annual pace in June, economists forecast before a July 26 report from the Commerce Department. A record-low 323,000 new homes were sold in 2010.

“The high proportion of distressed sales are keeping downward pressure on house prices,” Bernanke said July 13 in testimony to the House Financial Services Committee. “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.”

Builder Shares

Homebuilders are underperforming the overall market. The Standard & Poor’s 500 Homebuilding Index has declined 2.2 percent this year, compared with a 5.5 percent gain in the broader S&P 500 Index.

Builders remain cautious about the outlook, prompting them to look for other income sources. Miami-based Lennar Corp., the third-largest U.S. homebuilder by revenue, last month reported second-quarter profits that beat analysts’ estimates on rising earnings at its distressed-investing unit.

“The long-awaited selling season of 2011 has not yet defined itself as the beginning of a recovery cycle,” Stuart Miller, chief executive officer of Lennar, said on a June 23 teleconference. “The housing recovery will take time and patience and will be inconsistent and uneven.”

                        Bloomberg Survey

                             Exist    Exist
                             Homes    Homes
                              Mlns     MOM%

Date of Release              07/20    07/20
Observation Period            June     June
Median                        4.90     1.9%
Average                       4.92     2.3%
High Forecast                 5.20     8.1%
Low Forecast                  4.75    -1.3%
Number of Participants          71       71
Previous                      4.81    -3.8%
4CAST                         4.85     0.8%
ABN Amro                      4.90     1.9%
Action Economics              4.95     2.9%
Aletti Gestielle              4.80    -0.2%
Ameriprise Financial          4.98     3.5%
Banesto                       5.00     4.0%
Bantleon Bank AG              4.85     0.8%
Barclays Capital              4.85     0.8%
BBVA                          5.15     7.1%
BMO Capital Markets           4.90     1.9%
BNP Paribas                   4.90     1.9%
BofA Merrill Lynch            4.80    -0.2%
Briefing.com                  4.90     1.9%
Capital Economics             4.90     1.9%
CIBC World Markets            4.90     1.9%
Citi                          4.90     1.9%
Commerzbank AG                4.80    -0.2%
Credit Agricole CIB           4.95     2.9%
Credit Suisse                 4.95     2.9%
Danske Bank                   5.00     4.0%
DekaBank                      4.90     1.9%
Desjardins Group              4.75    -1.3%
Deutsche Bank Securities      5.00     4.0%
Exane                         4.90     1.9%
First Trust Advisors          4.80    -0.2%
FTN Financial                 5.03     4.6%
Goldman, Sachs & Co.          4.76    -1.0%
Helaba                        5.00     4.0%
High Frequency Economics      4.90     1.9%
HSBC Markets                  5.10     6.0%
Hugh Johnson Advisors         4.90     1.9%
IDEAglobal                    5.00     4.0%
IHS Global Insight            5.00     4.0%
Informa Global Markets        4.75    -1.3%
ING Financial Markets         4.90     1.9%
Insight Economics             5.00     4.0%
Intesa-SanPaulo               5.00     4.0%
J.P. Morgan Chase             4.80    -0.2%
Janney Montgomery Scott       5.02     4.4%
Jefferies & Co.               4.90     1.9%
Landesbank Berlin             4.78    -0.7%
Landesbank BW                 4.85     0.8%
Maria Fiorini Ramirez         4.95     2.9%
MF Global                     4.81     0.0%
Mizuho Securities             4.86     1.0%
Moody’s Analytics             4.96     3.1%
Morgan Stanley & Co.          5.00     4.0%
National Bank Financial       4.85     0.8%
Natixis                       4.92     2.3%
Nomura Securities             4.95     2.9%
OSK Group/DMG                 4.80    -0.2%
Parthenon Group               4.78    -0.6%
Pierpont Securities           4.95     2.9%
PineBridge Investments        4.86     1.0%
PNC Bank                      4.90     1.9%
Raiffeisenbank International  5.05     5.0%
Raymond James                 4.95     2.9%
RBC Capital Markets           5.20     8.1%
RBS Securities                5.00     4.0%
Scotia Capital                5.04     4.8%
Societe Generale              5.17     7.5%
Standard Chartered            4.90     1.9%
State Street Global Markets   4.98     3.5%
Stone & McCarthy Research     4.90     1.9%
TD Securities                 4.85     0.8%
UBS                           4.85     0.8%
University of Maryland        4.85     0.8%
Wells Fargo & Co.             4.90     1.9%
WestLB AG                     4.95     2.9%
Westpac Banking Co.           5.00     4.0%
Wrightson ICAP                5.00     4.0%
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