By Shobhana Chandra
Aug. 26 (Bloomberg) -- Sales of new houses in the U.S. probably fell in July as mortgage lending dried up and interest rates rose, economists said before reports today.
Purchases dropped 0.9 percent to a 525,000 annual pace, according to the median forecast in a Bloomberg News survey. Sales reached a 17-year low rate of 513,000 in March. A separate report may show home prices fell last quarter by the most in at least two decades.
Mounting losses on subprime mortgages have caused banks to withhold credit and boost borrowing costs, hurting demand even as falling prices make housing more affordable. The decrease in sales signals the worst real-estate slump in more than a quarter century will extend into 2009.
``Another deterioration in home sales is likely unless the weakening in mortgage credit availability is arrested,'' said Steven Wieting, managing director of economic and market analysis at Citigroup Global Markets Inc. in New York.
The Commerce Department's report on new-home purchases is due at 10 a.m. in Washington. Estimates of the 76 economists surveyed by Bloomberg News ranged from 493,000 to 570,000.
The S&P/Case-Shiller gauge of home prices in 20 metropolitan areas is projected to have plunged 16.2 percent in June from a year earlier, the biggest drop since records began in 2001, according to the survey median.
Nationally, prices probably dropped by a similar amount last quarter, the most since records began in 1988. The report is due at 9 a.m.
Pessimistic Consumers
The loss of home equity is evaporating household wealth and souring Americans' moods. At 10 a.m., a report from the New York-based Conference Board may show confidence this month was little-changed from a 16-year low reached in June, according to the survey.
While accounting for only about 15 percent of the housing market, new-home purchases are considered a timelier indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier.
Resales increased 3.1 percent in July, the National Association of Realtors said yesterday. The gain masked further weakness as inventories surged to a record high level of 4.67 million unsold houses and condos.
Inventories of new properties are likely to shrink as builders pull back. Ground was broken on the fewest new houses in 17 years in July, and permits, a sign of future construction, also fell, Commerce Department figures showed.
Foreclosures
U.S. banks repossessed almost three times as many houses in July as a year earlier and the number of properties at risk of foreclosure jumped 55 percent, California-based RealtyTrac Inc. reported this month.
Freddie Mac and Fannie Mae, which own or guarantee at least 42 percent of the $12 trillion in U.S. residential-mortgage debt outstanding, had combined losses of $14.9 billion in the past four quarters as delinquencies rose to record levels. Their cost to raise capital is getting more prohibitive by the day, raising the possibility the government will have to pump in cash to underpin their balance sheets.
The interest rate on a 30-year fixed mortgage averaged 6.43 percent last month, the highest since August 2007, according to figures from Freddie Mac. The rate has averaged 6.50 percent so far this month.
Government officials remain pessimistic.
``We have a ways to go before we start seeing a turnaround,'' Housing and Urban Development Secretary Steve Preston said yesterday in an interview. ``We'll be well into 2009 before we see some real energy in this market.''
Company results reflect the distress. Home Depot Inc. and Lowe's Cos., the world's two largest home-improvement retailers, posted declines in second quarter profit.
``We continue to see pressure on our market and the consumer,'' Home Depot Chief Executive Officer Frank Blake said in a statement last week.
Bloomberg Survey
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Case Shil Consumer New Home
Monthly Conf Sales
YOY% Index ,000's
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Date of Release 08/26 08/26 08/26
Observation Period June Aug. July
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Median -16.2% 53.0 525
Average -16.3% 53.2 524
High Forecast -15.9% 56.1 570
Low Forecast -17.3% 50.0 493
Number of Participants 26 70 76
Previous -15.8% 51.9 530
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4CAST Ltd. -16.0% 54.0 515
Action Economics --- 54.0 530
AIG Investments -15.9% 51.5 530
Aletti Gestielle SGR --- 52.7 530
Analytical Synthesis -15.9% --- 514
Argus Research Corp. --- 53.0 545
Banc of America Securitie --- 53.5 535
Bank of Tokyo- Mitsubishi --- 53.6 493
Barclays Capital --- 53.0 525
BBVA -17.3% 52.9 522
BMO Capital Markets -16.4% 52.5 525
BNP Paribas --- 54.0 510
Briefing.com --- 53.0 535
Calyon --- 54.0 524
CFC Group -16.1% 53.4 531
CIBC World Markets --- --- 520
Citi --- 50.0 525
ClearView Economics --- --- 520
Commerzbank AG --- 52.0 520
Credit Suisse --- 52.0 500
Daiwa Securities America --- 53.0 520
Danske Bank --- 51.0 520
DekaBank --- 53.0 535
Desjardins Group -16.1% 54.0 525
Deutsche Bank Securities --- 51.5 525
Deutsche Postbank AG --- 53.0 ---
Dresdner Kleinwort --- 52.5 520
DZ Bank -16.0% 53.4 525
First Trust Advisors --- 54.5 521
Fortis -16.1% 55.0 530
FTN Financial --- 52.5 525
Global Insight Inc. --- --- 519
Goldman, Sachs & Co. --- 53.5 524
H&R Block Financial Advis --- 52.5 525
HBOS Treasury Services --- 54.0 515
Helaba --- 54.0 535
High Frequency Economics -16.2% --- 530
Horizon Investments --- 52.0 530
HSBC Markets -16.2% 54.5 540
IDEAglobal -16.5% 53.0 520
Informa Global Markets --- 52.0 520
ING Financial Markets -16.4% 51.0 530
Insight Economics --- 54.0 520
Intesa-SanPaulo -16.0% 54.0 533
J.P. Morgan Chase -17.0% 52.5 520
Janney Montgomery Scott L -16.0% 55.0 520
Landesbank Berlin --- 54.0 520
Landesbank BW -16.8% 53.0 520
Lehman Brothers -16.4% 55.0 520
Lloyds TSB --- 54.0 530
Maria Fiorini Ramirez Inc --- 53.5 515
Merk Investments --- 53.0 527
Merrill Lynch --- 53.0 525
Moody's Economy.com --- 53.0 527
Morgan Keegan & Co. --- --- 527
Morgan Stanley & Co. --- 55.0 510
National Bank Financial --- 53.0 530
National City Corporation --- 54.4 570
Natixis -16.2% 52.5 520
Newedge --- 53.2 ---
Nomura Securities Intl. --- --- 525
Nord/LB --- 52.3 ---
PNC Bank --- --- 530
RBS Greenwich Capital --- 54.0 520
Ried, Thunberg & Co. --- --- 510
Schneider Trading Associa --- 56.1 533
Scotia Capital -16.0% 52.5 520
Societe Generale --- 54.0 530
Stone & McCarthy Research --- 54.6 528
TD Securities -16.1% 52.4 525
Thomson Financial/IFR --- 53.0 515
UBS Securities LLC -16.3% 53.5 515
Unicredit MIB -16.2% 53.0 525
University of Maryland -16.3% 53.0 541
Wachovia Corp. --- 54.0 500
Wells Fargo & Co. --- 54.0 530
WestLB AG -16.5% 53.0 525
Westpac Banking Co. -16.8% 53.5 516
Wrightson Associates --- 52.5 510
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To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
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