U.S. Economy: Sales of New Houses Unexpectedly Dropped in JuneBob Willis and Shobhana Chandra
Sales of new U.S. homes unexpectedly fell for a second month and a gauge of property values also dropped, showing the industry that sparked the recession is stagnating.
Purchases dropped 1 percent in June to a 312,000 annual pace, a three-month low, figures from the Commerce Department showed today in Washington. Prices in 20 cities dropped 4.5 percent in the year ended May, the most since November 2009, according to a report from S&P/Case-Shiller.
An expanding pipeline of foreclosures and a lack of demand will probably keep home values depressed this year, discouraging construction and delaying a rebound in housing. Another report showed consumer confidence unexpectedly recuperated in July from an eighth-month low, led by an improvement in the employment outlook for the next six months.
“You’re still dealing with a supply-demand imbalance that suggests home prices will remain under pressure,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York. “Even though confidence has shown some improvement, we are still at an utterly depressed level.”
Stocks dropped as wrangling between lawmakers over plans to raise the federal debt limit offset better-than-forecast earnings from Ford Motor Co. The Standard & Poor’s 500 Index decreased 0.2 percent to 1,334.28 at 11:50 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.95 percent from 3 percent late yesterday.
The median estimate in a Bloomberg News survey of 72 economists projected sales of new houses would climb to a 320,000 annual rate. Forecasts ranged from 300,000 to 342,000. Sales in May were revised down to a 315,000 pace from a previously estimated 319,000. Some 323,000 new dwellings were sold in 2010, the fewest on record.
The Conference Board’s consumer confidence index rose to 59.5 from a revised 57.6 reading in June that was lower than previously estimated, figures from the New York-based private research group showed. Economists predicted the July gauge would fall to 56, according to the median forecast in a Bloomberg News survey.
Easing fuel prices may make households more comfortable opening their wallets in the second half of the year. At the same time, Federal Reserve Chairman Ben S. Bernanke told Congress earlier this month that unemployment above 9 percent and falling home values are a concern for Americans, which may restrain any recovery in consumer spending.
“People are feeling a little bit better now that falling gasoline prices have taken some of the burden off of their pocket book,” said Russell Price, a senior economist at Ameriprise Financial Services Inc. in Detroit. “Despite the dire employment situation, people are feeling better about their own employment situation.”
The report on demand for new houses showed sales fell 16 percent in the Northeast to an all-time low and 13 percent in the West. Purchases climbed 9.5 percent in the Midwest and 3.4 percent in the South.
The median price of a new home increased 7.2 percent to $235,200 from June 2010, today’s Commerce Department report showed. The figures are often influenced by the mix of sales in any one month, one reason why it can diverge from other data.
S&P/Case-Shiller tracks the value of the same house over time, making it a more reliable indicator. The figures showed prices were little changed in May from the prior month after adjusting for seasonal variations, following an April increase of 0.4 percent. Unadjusted prices climbed 1 percent from the prior month, a second consecutive increase.
“The concern is that much of the monthly gains are only seasonal,” David Blitzer, chairman of the index committee at S&P, said in a statement. “Sustained increases in home prices over several months and better annual results need to be seen before we can confirm real estate market recovery.”
The Conference Board’s confidence report showed more respondents expected the availability of jobs would improve in the next six months, while the proportion expecting their incomes to rise also advanced.
Grocer Safeway Inc. is among companies trimming sales forecasts on growing concern over the slowdown in employment. Payrolls grew by 18,000 workers in June, the smallest gain in nine months, as the unemployment rate rose to 9.2 percent, according to Labor Department figures.
“Everybody has to appreciate that these are pretty unusual times,” said Steven Burd, Safeway’s chief executive officer, said on a July 21 conference call with analysts. “I don’t think anybody expected fuel costs to be up 32% on the year, unemployment to be at 9.2 and consumer confidence to be hovering around 60.”
Pleasanton, California-based Safeway retreated from an earlier 1 percent to 1.5 percent projection for growth in same store sales excluding fuel. Instead, the company expects an uptick closer to 1 percent, officials said on the call.
The stalemate in Washington over raising the nation’s $14.3 trillion debt ceiling could also be clouding consumers’ moods. Party leaders are readying dueling proposals to cut the government’s budget deficit and raise the debt-ceiling by Aug. 2, the date the Treasury Department says the U.S. will lose its borrowing authority.
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