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Home Prices in U.S. Probably Fell, Consumer Confidence Plunged

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A "Sold" sign stands outside an existing home offered through Re/Max International Inc. in Clayton, North Carolina, U.S. Any recovery in home values is probably years away as foreclosures dump more properties onto to the market. Photographer: Jim R. Bounds/Bloomberg

Aug. 30 (Bloomberg) -- Residential real estate prices probably dropped in the year ended June by the most in 19 months, indicating the housing market continues to hamper the U.S. recovery, economists said before a report today.

The S&P/Case-Shiller index of home values in 20 cities fell 4.6 percent from June 2010, the biggest 12-month decrease since November 2009, according to the median forecast of 31 economists surveyed by Bloomberg News. Another report may show consumer confidence sank in August to the lowest level in 10 months.

Any recovery in home values is probably years away as foreclosures dump more properties onto to the market, while a jobless rate hovering around 9 percent and strict lending rules hurt sales. Declining home equity combined with the slump in stock prices this month is damaging household wealth, raising the risk that spending will falter.

“There are just too many factors that will continue to drag home prices down,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “We still have a lot of foreclosures in the pipeline, a lot of excess supply, and demand for homes is continuing to weaken.”

The S&P/Case-Shiller index, based on a three-month average, is due at 9 a.m. New York time. Survey estimates ranged from decreases of 4 percent to 5.5 percent, after a 4.5 percent drop in the year ended May. The group will also release national figures on real estate values for the second quarter.

Month-to-Month

Home prices were probably unchanged in June from the prior month after falling less than 0.1 percent in May, according to the Bloomberg survey’s median estimate, a sign the deterioration in prices may be abating. The year-over-year gauges, nonetheless, provide better indications of trends, according to the S&P/Case-Shiller group.

With joblessness stuck near 9 percent for a second year, housing has not recovered at the same rate as the rest of the U.S. Existing home sales fell to 4.91 million last year, the lowest level since 1997.

The housing slump, paired with a lackluster labor market, has hurt sentiment among households. The New York-based Conference Board’s consumer confidence gauge, due at 10 a.m., fell to 52 in August, the lowest since October, from 59.5 in July, according to the survey median. Projections ranged from 40 to 57.

“Consumer confidence is still weak, and the housing sector remains in a fragile state,” Robert Toll, chairman of Toll Brothers Inc., the largest U.S. luxury homebuilder, said in an Aug. 24 call with analysts. “The nation’s economy continues to suffer from the lack of jobs in housing construction and the related manufacturing and service sectors that a decent new-home market would typically generate.”

Builder Shares

Shares of residential real estate developers have underperformed the broader stock market since the end of May, showing investors are concerned a slowing economy will be detrimental to the industry. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders dropped 26 percent through yesterday, compared with a 10 percent decrease for the broader S&P 500 Index.

Federal Reserve Chairman Ben S. Bernanke, speaking last week in Jackson Hole, Wyoming, said “an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines” have held back the housing market.

During the speech, Bernanke said the economy will probably improve in the second half of 2011, adding the central bank can aid the recovery if needed. Housing will stabilize, “if for no other reason than that ongoing population growth and household formation will ultimately demand it,” the chairman said.

                        Bloomberg Survey

===========================================
                         Case Shil Consumer
                           Monthly     Conf
                              YOY%    Index
===========================================

Date of Release              08/30    08/30
Observation Period            June     Aug.
-------------------------------------------
Median                       -4.6%     52.0
Average                      -4.6%     51.5
High Forecast                -4.0%     57.0
Low Forecast                 -5.5%     40.0
Number of Participants          31       70
Previous                     -4.5%     59.5
-------------------------------------------
4CAST                        -4.5%     52.0
ABN Amro                      ---      50.0
Action Economics              ---      55.0
Aletti Gestielle              ---      52.0
Ameriprise Financial          ---      54.0
Banesto                       ---      53.2
Bank of Tokyo- Mitsubishi     ---      51.0
Bantleon Bank AG              ---      50.0
Barclays Capital              ---      50.0
Bayerische Landesbank         ---      52.0
BBVA                         -4.7%     54.0
BMO Capital Markets          -4.6%     53.0
BNP Paribas                   ---      45.0
BofA Merrill Lynch           -4.6%     52.0
Briefing.com                 -5.0%     50.0
Capital Economics            -4.5%     50.0
Citi                          ---      53.5
ClearView Economics           ---      51.5
Comerica Inc                  ---      57.0
Commerzbank AG               -4.5%     55.0
Credit Agricole CIB           ---      52.5
Credit Suisse                -4.6%     49.0
DekaBank                      ---      46.0
Desjardins Group             -4.5%     49.0
Deutsche Bank Securities      ---      53.0
Deutsche Postbank AG          ---      53.0
DZ Bank                      -4.8%     52.0
Exane                         ---      52.0
Fact & Opinion Economics     -4.0%     ---
First Trust Advisors          ---      48.0
FTN Financial                 ---      51.0
Goldman, Sachs & Co.          ---      53.0
Helaba                        ---      55.0
High Frequency Economics     -4.5%     40.0
HSBC Markets                 -4.5%     52.5
Hugh Johnson Advisors         ---      52.0
IDEAglobal                   -4.9%     54.0
IHS Global Insight           -4.5%     51.9
Informa Global Markets        ---      52.5
ING Financial Markets        -4.5%     ---
Intesa-SanPaulo               ---      52.0
J.P. Morgan Chase            -4.6%     52.0
Janney Montgomery Scott      -5.5%     54.5
Landesbank Berlin             ---      49.0
Landesbank BW                -4.5%     50.0
Maria Fiorini Ramirez         ---      51.0
Market Securities            -5.0%     ---
MF Global                    -4.3%     47.5
Moody’s Analytics             ---      55.0
Morgan Stanley & Co.          ---      50.0
National Bank Financial       ---      51.0
Natixis                      -5.0%     55.0
Nomura Securities            -4.6%     53.8
Nord/LB                       ---      51.5
Parthenon Group              -4.5%     48.6
Pierpont Securities           ---      53.0
PNC Bank                      ---      54.0
Raiffeisenbank International  ---      55.0
Raymond James                 ---      52.0
RBC Capital Markets           ---      49.0
RBS Securities                ---      50.0
Scotia Capital                ---      52.5
SMBC Nikko Securities        -4.4%     50.0
Societe Generale             -4.8%     54.5
Standard Chartered           -4.7%     50.0
State Street Global Markets  -4.5%     51.3
Stone & McCarthy Research     ---      52.0
TD Securities                 ---      52.0
UBS                          -4.1%     51.0
Wells Fargo & Co.             ---      49.8
WestLB AG                    -5.2%     53.0
Westpac Banking Co.          -5.0%     47.0
Wrightson ICAP                ---      52.0
===========================================

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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