By Timothy R. Homan
Aug. 7 (Bloomberg) -- Fewer Americans signed contracts in June to purchase previously owned homes, raising the risk that falling demand will cause property values to slide further, economists said before a private report today.
The index of pending home resales fell 1 percent after a decline of 4.7 percent in May, according to the median forecast in a Bloomberg News survey of 37 economists. The drop would be the second consecutive and the fourth so far this year.
Prospective homebuyers are delaying purchases as the biggest slump in home sales in 26 years forces prices down. Stricter lending rules are also making it harder to obtain mortgage financing, indicating purchases will continue to decline.
``We have too much inventory, and prices haven't corrected enough,'' said Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California. ``We're likely to see some further retrenchment in the housing sector for the rest of this year and the beginning of next.''
The National Association of Realtors is scheduled to release the figures at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 3 percent to a gain of 3.5 percent.
A separate report today from the Labor Department may show that initial jobless claims for the week ended Aug. 2 fell from a five-year high. The number of workers filing applications dropped to 425,000 from 448,000 the prior week, according to economists surveyed.
Leading Indicator
The pending resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors.
The group's figures on July existing home sales are due Aug. 25. Purchases in June fell 2.6 percent to a 4.86 million annual pace, the lowest level in a decade, from a 4.99 million rate the prior month. At the June sales rate, it would take 11.1 months to sell all the houses on the market, about twice the supply that reflects a balanced market, according to the agents' group.
Other measures also show sales may continue to decline. The Mortgage Bankers Association's index of applications for loans to purchase a house reached a five-year low at the end of July.
Home prices in 20 U.S. metropolitan areas fell in May by 15.8 percent from a year earlier, the most on record, the S&P/Case-Shiller home-price index showed on July 29.
Mounting Foreclosures
A surge in bank repossessions is contributing to the drop in property values. Foreclosure filings in the second quarter jumped 121 percent from a year earlier, RealtyTrac Inc., a seller of default data, said last month. Almost 740,000 properties were in some stage of foreclosure, the most since the Irvine, California- based company began reporting in January 2005.
Homebuilders are struggling as sales drop. D.R. Horton Inc., the largest U.S. homebuilder, this week reported its fifth straight quarterly loss. The Fort Worth, Texas-based company recorded $330.4 million in pretax expenses to write down property value and abandon scheduled land purchases.
``We're continuing to cut at all levels,'' Chief Executive Officer Donald Tomnitz said during an Aug. 5 conference call with analysts. Foreclosures continue to ``cloud'' the housing market, he said.
Bloomberg Survey
===============================================
Initial Pending
Claims Homes
,000's MOM%
===============================================
Date of Release 08/07 08/07
Observation Period Aug. 3 June
-----------------------------------------------
Median 425 -1.0%
Average 422 -0.8%
High Forecast 463 3.5%
Low Forecast 390 -3.0%
Number of Participants 40 37
Previous 448 -4.7%
-----------------------------------------------
4CAST Ltd. 415 0.5%
Action Economics 430 -0.2%
AIG Investments --- 1.0%
Banesto 410 ---
Bank of Tokyo- Mitsubishi 418 ---
Barclays Capital 425 ---
BMO Capital Markets 420 -1.0%
BNP Paribas 463 ---
Briefing.com 420 ---
CFC Group 425 -0.7%
Citi 425 ---
Commerzbank AG 415 1.0%
Credit Suisse 435 ---
DekaBank --- -0.5%
Deutsche Bank Securities --- -2.0%
Dresdner Kleinwort --- -0.8%
DZ Bank --- -1.0%
First Trust Advisors 417 ---
Fortis --- 0.5%
FTN Financial --- -3.0%
H&R Block Financial Advis 410 -2.0%
High Frequency Economics 420 -2.0%
HSBC Markets 420 1.0%
IDEAglobal 425 -1.5%
Informa Global Markets 425 -3.0%
ING Financial Markets 405 -1.0%
Insight Economics 425 ---
J.P. Morgan Chase 425 -2.0%
Janney Montgomery Scott L --- -1.8%
JPMorgan Private Client 425 -1.0%
Landesbank Berlin 390 ---
Lehman Brothers 435 -1.5%
Lloyds TSB 415 1.0%
Maria Fiorini Ramirez Inc 420 ---
Merk Investments 420 -1.3%
MFC Global Investment Man 410 ---
Moody's Economy.com 440 -1.5%
National City Corporation --- -1.5%
Natixis --- -2.0%
Nord/LB 430 ---
Ried, Thunberg & Co. 430 -1.0%
Schneider Trading Associa --- 0.0%
Societe Generale 450 ---
Stone & McCarthy Research 400 ---
TD Securities 420 -1.0%
Thomson Financial/IFR 430 0.0%
UBS Securities LLC 425 -1.0%
Unicredit MIB 425 -1.0%
University of Maryland 390 3.5%
WestLB AG --- -1.0%
Westpac Banking Co. 425 -2.0%
Wrightson Associates 430 -1.0%
================================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Thursday, August 7, 2008
U.S. Pending Home Sales Probably Fell for Fourth Time This Year
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