U.S. Preview: Existing Home Sales Expected to Bump Up to 4.95 Million in May (Repeat)

US Economy | Written by CEP News | Jun 26 08 13:09 GMT |
(CEP News) - Existing home sales for May, which will be released Thursday by the National Association of Realtors (NAR), are expected to see a 1.2% rise to an annual pace of 4.95 million units following April's 1.0% decline to 4.89 million. The pace has been below the 5 million mark for two months.

The previous report saw single-family unit sales come in at 4.34 million, decreasing from a rate of 4.36 million in the previous month, while the national median existing home price was $202,300, up from the previous month but marking an 8% decline from the same time a year ago.

Lehman Brothers economists expect a 2.5% increase to 5.00 million in May based on the unexpected gain in pending home sales in April, which suggests "an increase in closed contracts in May and June."

U.S. pending home sales have been declining in five of the past six months, yet in the most recent report they jumped 6.3% to reach their highest level in six months. The index tracks home sales that have been signed but not finalized, a process that takes another month or two, thereby offering a forecast for existing home sales.

In the longer-term, however, Lehman analysts said the expected gain in existing home sales will be "a fleeting gain" as sales should continue to decline through the rest of the summer, "bottoming in September."

By contrast, Dawn Desjardins, assistant chief economist at RBC Capital Markets, is looking for sales to stabilize, "albeit at a very low level." She said the housing market "remains in deep depression and, for the time being, the main concern is the glut of homes for sale."

Total housing inventories came in with an 11.2-month supply in April, up from the 10-month supply in March.

Desjardins said "persistent price concessions will likely bolster activity but we haven't seen any clear signs of improvement yet."

A third view comes from BBVA economists, who expect housing demand to keep weakening as deflation plagues the housing market. "In our view, the housing market will deteriorate - each time at a slower pace - throughout the rest of the year and will not start to recover until the beginning of 2009."

Other forecasters are looking for a gain of up to 5.3% in the month, which would put the annual pace at 5.15 million units, while the lowest forecasts expect a 2.9% decline to a pace of 4.75 million units.

Earlier in the week, the S&P Case-Shiller U.S. home price index continued to deteriorate in April as the 20-city composite index posted a record annual decline of 15.3%. Meanwhile, the Office of Federal Housing Enterprise Oversight (OFHEO) reported a 0.8% monthly decline in house prices in April.

By Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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