Existing Home Sales in the U.S. Probably Rose From Decade Low

By Shobhana Chandra

Aug. 25 (Bloomberg) -- Sales of existing houses in the U.S. probably rose in July from a 10-year low as declining prices helped stabilize demand, economists said before a report today.

Resales gained 0.9 percent to a 4.91 million annual rate, according to the median forecast of 69 economists surveyed by Bloomberg News.

Record foreclosures have pushed property values down even more, luring some bargain hunters into the market. Still, tougher lending rules, rising unemployment and a glut of unsold houses signal the outlook for residential real estate remains grim.

``Housing is searching for a bottom, but we are probably not there yet,'' said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. ``Buyers are showing some interest because of the price declines.''

The report from the National Association of Realtors is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 4.69 million to 5 million. June's 4.86 million pace was the weakest since 1998.

Resales account for about 85 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.

For that reason, economists consider new-home sales, which are recorded when a contract is signed, a more timely barometer of the market. A report tomorrow from the Commerce Department may show new home sales fell in July for the third consecutive month, according to the Bloomberg survey median.

Fed View

Tight credit conditions and ongoing declines in residential construction will weigh on economic growth in coming months, Federal Reserve policy makers said at their Aug. 5 meeting. The Fed's quarterly survey of bank loan officers showed 75 percent had made it tougher for prime borrowers to get a mortgage, more than in the April survey.

``I worry a lot about what's happening in housing,'' Martin Feldstein, a member of the committee that charts American business cycles, said in an interview on Bloomberg Television last week. ``The number of negative-equity homes is exploding. Housing prices will continue to go down, driven by the large oversupply of houses and the increasing number of foreclosures.''

The number of unsold previously owned homes has piled up as some owners resist lowering prices and banks repossess more properties.

For their part, builders are working to pare the inventory of new homes. Ground was broken on the fewest new houses in 17 years in July, and permits, a sign of future construction, also fell, a report from the Commerce Department last week showed.

Prices Falling

The S&P/Case-Shiller index of home prices in 20 metropolitan areas dropped in May, extending a string of declines that started in August 2006. June figures are due tomorrow.

``Buyers are coming back into the market,'' Tom McCormick, president of Astoria Homes, said in a Bloomberg Television interview last week. ``Remarkably low'' prices do ``seem to be bringing people in off the sidelines.''

While lower home values may be reviving interest among some homebuyers, the declines also reduce household wealth, just as job losses and borrowing costs are rising. That's contributing to a slowdown in consumer spending, the biggest part of the economy.

Bloomberg Survey

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Exist Exist
Homes Homes
Mlns MOM%
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Date of Release 08/25 08/25
Observation Period July June
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Median 4.91 1.0%
Average 4.91 1.0%
High Forecast 5.00 2.9%
Low Forecast 4.69 -3.5%
Number of Participants 69 69
Previous 4.86 -2.6%
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4CAST Ltd. 5.00 2.9%
Action Economics 4.93 1.4%
AIG Investments 4.93 1.4%
Aletti Gestielle SGR 4.90 0.8%
Analytical Synthesis 4.69 -3.5%
Argus Research Corp. 4.90 0.8%
Banc of America Securitie 4.92 1.2%
Bank of Tokyo- Mitsubishi 4.98 2.5%
Barclays Capital 4.95 1.9%
BBVA 4.85 -0.2%
BMO Capital Markets 4.90 0.8%
BNP Paribas 4.93 1.4%
Briefing.com 4.95 1.9%
Calyon 4.91 1.0%
CIBC World Markets 4.90 0.8%
Citi 4.90 0.8%
ClearView Economics 4.95 1.9%
Commerzbank AG 4.80 -1.2%
Credit Suisse 4.95 1.9%
Daiwa Securities America 4.95 1.9%
Danske Bank 4.84 -0.4%
DekaBank 5.00 2.9%
Desjardins Group 4.89 0.6%
Deutsche Bank Securities 4.80 -1.2%
Dresdner Kleinwort 4.93 1.4%
DZ Bank 4.92 1.2%
First Trust Advisors 4.89 0.6%
Fortis 5.00 2.9%
FTN Financial 4.90 0.8%
Global Insight Inc. 4.92 1.2%
Goldman, Sachs & Co. 4.81 -1.0%
H&R Block Financial Advis 4.85 -0.2%
Helaba 4.90 0.8%
HSBC Markets 4.95 1.9%
IDEAglobal 4.95 1.9%
Informa Global Markets 4.85 -0.2%
ING Financial Markets 4.96 2.1%
Insight Economics 4.80 -1.2%
Intesa-SanPaulo 5.00 2.9%
Janney Montgomery Scott L 4.81 -1.0%
Landesbank Berlin 4.93 1.3%
Landesbank BW 4.90 0.8%
Lehman Brothers 4.93 1.4%
Lloyds TSB 4.92 1.2%
Maria Fiorini Ramirez Inc 4.90 0.8%
Merrill Lynch 4.90 0.8%
Moody's Economy.com 4.88 0.4%
Morgan Stanley & Co. 4.90 0.8%
National Bank Financial 4.84 -0.4%
National City Corporation 4.90 0.8%
Natixis 4.91 1.0%
Nomura Securities Intl. 4.90 0.8%
Okasan Securities 4.97 2.3%
PNC Bank 4.86 0.0%
RBS Greenwich Capital 4.93 1.4%
Ried, Thunberg & Co. 5.00 2.9%
Schneider Trading Associa 4.93 1.4%
Scotia Capital 4.85 -0.2%
Societe Generale 4.93 1.4%
Stone & McCarthy Research 4.90 0.8%
TD Securities 4.86 0.0%
Thomson Financial/IFR 4.88 0.4%
Unicredit MIB 5.00 2.9%
University of Maryland 4.98 2.5%
Wachovia Corp. 4.75 -2.3%
Wells Fargo & Co. 4.93 1.4%
WestLB AG 4.90 0.8%
Westpac Banking Co. 5.00 2.9%
Wrightson Associates 5.00 2.9%
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To contact the report on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net