Purchases of previously owned U.S. homes in August probably held close to the weakest level this year and construction dropped to a three-month low as the industry showed few signs of a emerging from its slump, economists said before reports this week.
Existing-home sales rose 1.7 percent to a 4.75 million annual rate from an eight-month low in July, according to the median projection of 59 economists surveyed by Bloomberg News before a National Association of Realtors report on Sept. 21. Housing starts dropped 2.3 percent, economists forecast Commerce Department data will show a day earlier.
Limited employment, declining property values and mounting foreclosures remain hurdles for builders like Hovnanian Enterprises Inc., thwarting a sustained rebound in residential real estate. Federal Reserve officials meet this week to discuss whether additional measures are needed to help revive the recovery and a languishing job market.
“The economy overall will take this crawl-stagger-crawl approach into 2012, which reflects all the issues the recovery is wrestling,” said Paul Ballew, chief economist at Nationwide Mutual Insurance Co. in Columbus, Ohio. “Housing should hit a trough by the end of this year before going sideways at very suppressed levels.”
Concerns the economy may be faltering, limited income gains and unemployment above 9 percent have taken a toll on Americans’ sentiment, dimming the prospects for a pickup in housing. The Conference Board’s index of consumer confidence slumped in August to the lowest level since April 2009, and the Bloomberg Consumer Comfort Index has been stuck below minus 40 since the end of February, a level associated with recessions.
Payrolls were unchanged in August, the weakest reading in a year, according to Labor Department figures. Shifting views on the economic outlook and concerns about Europe’s debt crisis led to historical financial market volatility in August.
“With all of the economic turmoil, both domestic and international, there’s not much that points to an improving housing market at any point in the near future,” Ara Hovnanian, chairman and chief executive officer of Hovnanian Enterprises, said in a Sept. 8 call with analysts. “Our internal business plan assumes market conditions do not improve.”
Homebuyer traffic and construction along the eastern seaboard may also have been hindered by Hurricane Irene, which caused losses of about $12.4 billion, according to an estimate by Kinetic Analysis Corp., a Silver Spring, Maryland, firm that predicts the effects of disasters.
The median projection for the annual pace of August housing starts is 590,000, little changed from the 587,000 begun last year, the second-fewest ever. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959.
Building permits, an indicator of future construction, fell 1.8 percent in August, the report from the Commerce Department will also show according to the median forecast of economists surveyed.
A report tomorrow may show the National Association of Home Builders/Wells Fargo sentiment index held at 15 this month, according to the survey median. Readings lower than 50 mean more respondents view conditions as poor.
Homebuilder shares’ have declined more than the broader market so far this year. The Standard & Poor’s Homebuilder Supercomposite Index, which includes shares of companies such as KB Home and D.R. Horton Inc. has slumped 26 percent this year, compared with a 3.3 percent decline for the S&P 500 Index.
Among other data this week, the Conference Board’s index of leading economic indicators is projected to show growth may cool in the second half of the year. The gauge of the outlook for the next three to six months rose 0.1 percent in August after a 0.5 percent increase a month earlier, economists forecast the Sept. 22 report will show.
Fed officials may propose new measures to galvanize the economy when the Federal Open Market Committee completes a two-day meeting on Sept. 21. Ben S. Bernanke, the central bank’s chairman, told economists Sept. 9 in Minneapolis that policy makers have measures at hand and are “prepared to employ these tools as appropriate.”
Bloomberg Survey ================================================================ == Release Period Prior Median Indicator Date Value Forecast ================================================================ == NAHB Housing Index 9/19 Sept. 15 15 Housing Starts ,000’s 9/20 Aug. 604 590 Housing Starts MOM% 9/20 Aug. -1.5% -2.3% Building Permits ,000’s 9/20 Aug. 601 590 Building Permits MOM% 9/20 Aug. -2.6% -1.8% Exist Homes Mlns 9/21 Aug. 4.67 4.75 Exist Homes MOM% 9/21 Aug. -3.5% 1.7% Initial Claims ,000’s 9/22 17-Sep 428 420 Cont. Claims ,000’s 9/22 10-Sep 3726 3720 LEI MOM% 9/22 Aug. 0.5% 0.1% FHFA HPI MOM% 9/22 July 0.9% 0.2% ================================================================ ==