By Bob Willis
Sept. 24 (Bloomberg) -- Home resales in the U.S. probably fell in August, signaling the market remained in a slump heading into the latest financial meltdown, economists said before a report today.
Sales of existing homes dropped 1.2 percent last month to a 4.94 million annual pace, matching the year's average, according to the median estimate of economists surveyed by Bloomberg News.
The collapse in lending that brought down American International Group. Inc. and Lehman Brothers Holdings Inc. this month may also make mortgages more difficult to get. A lack of credit raises the odds sales will again slump after hovering around a 10-year low this year, even as borrowing costs drop.
``The risk to housing markets remains on the downside until we see an easing in credit standards,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``We're looking at continued softness in sales, but there are signs of stabilization at low levels.''
The National Association of Realtors' report on home resales is due at 10 a.m. in Washington. Estimates of the 73 economists surveyed ranged from 4.7 million to 5.15 million.
Resales dropped to a 4.85 million rate in June, the lowest in a decade and down 33 percent from the record reached in September 2005.
Tomorrow, the Commerce Department is forecast to report that sales of new houses dropped to an annual pace of 510,000 from 515,000 in July, according to the survey median. Those purchases reached a 17-year low of 503,000 in June, 64 percent lower than the July 2005 peak.
Builder Cutbacks
As sales shrank, builders scaled back construction projects to pare swelling inventories. Work began in August on the fewest houses since 1991, the Commerce Department reported last week. The number of building permits issued also fell, signaling construction cutbacks will continue to hurt the economy.
``The biggest issue is consumer confidence in housing right now,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., New Jersey's largest homebuilder, said in a Sept. 19 interview on Bloomberg Television. ``It remains a very challenging environment.''
Hovnanian said sales in ``some select markets,'' such as northern California and the Washington suburbs in Virginia, ``have really started to pick up.'' Still, it's ``absolutely'' too early to call a bottom for the market, he said.
Resales stabilized in recent months as some Americans took advantage of depressed property values. One-third to 40 percent of July purchases reflected distressed properties, including foreclosures, the real-estate agent's group said last month.
Prices Drop
The median price of an existing house in July dropped 7.1 percent compared with the same time last year, and the number of homes for sale jumped to a record.
Stricter lending regulations and tumbling home prices make it harder for Americans to tap home equity for extra cash. Consumer spending in the third quarter will probably be the weakest since 1991, according to economists surveyed earlier this month.
The housing slump is the ``root cause'' of the turmoil in financial markets, Treasury Secretary Henry Paulson said in testimony before the Senate yesterday. It ``has resulted in illiquid mortgage-related assets that are choking off the flow of credit which is so vitally important to our economy.''
Federal Reserve Chairman Ben S. Bernanke joined Paulson in urging lawmakers to quickly pass a $700 billion rescue plan for financial institutions and warned the economy will shrink if markets don't begin functioning normally.
Central bankers last week held the benchmark lending rate unchanged at 2 percent and said ``tight credit conditions, the ongoing housing contraction and some slowing in export growth are likely to weigh on economic growth over the next few quarters.''
Bloomberg Survey
=============================================
Exist Exist
Homes Homes
Mlns MOM%
=============================================
Date of Release 09/24 09/24
Observation Period Aug. July
---------------------------------------------
Median 4.94 -1.2%
Average 4.94 -1.1%
High Forecast 5.15 3.0%
Low Forecast 4.70 -6.0%
Number of Participants 73 73
Previous 5.00 3.1%
---------------------------------------------
4CAST Ltd. 4.95 -1.0%
Action Economics 4.97 -0.6%
AIG Investments 4.90 -2.0%
Aletti Gestielle SGR 4.88 -2.4%
Analytical Synthesis 4.78 -4.4%
Argus Research Corp. 4.90 -2.0%
Banc of America Securitie 4.95 -1.0%
Bank of Tokyo- Mitsubishi 4.91 -1.8%
Bantleon Bank AG 4.91 -1.8%
Barclays Capital 4.92 -1.6%
BBVA 4.70 -6.0%
BMO Capital Markets 4.90 -2.0%
BNP Paribas 4.90 -2.0%
Briefing.com 4.95 -1.0%
Calyon 4.85 -3.0%
CFC Group 5.00 0.0%
CIBC World Markets 5.00 0.0%
Citi 4.95 -1.0%
ClearView Economics 4.85 -3.0%
Credit Suisse 4.90 -2.0%
Daiwa Securities America 4.90 -2.0%
Danske Bank 4.99 -0.2%
DekaBank 4.90 -2.0%
Desjardins Group 4.90 -2.0%
Deutsche Bank Securities 4.90 -2.0%
Dresdner Kleinwort 4.94 -1.2%
DZ Bank 4.95 -1.0%
First Trust Advisors 4.93 -1.5%
Fortis 4.90 -2.0%
FTN Financial 5.10 2.0%
Global Insight Inc. 4.90 -2.0%
Goldman, Sachs & Co. 4.95 -1.0%
H&R Block Financial Advis 4.92 -1.6%
Helaba 4.95 -1.0%
High Frequency Economics 5.10 2.0%
HSBC Markets 5.00 0.0%
IDEAglobal 4.95 -1.0%
Informa Global Markets 4.98 -0.4%
ING Financial Markets 4.97 -0.6%
Insight Economics 4.95 -1.0%
Intesa-SanPaulo 5.00 0.0%
J.P. Morgan Chase 5.00 0.0%
Janney Montgomery Scott L 5.13 2.6%
Landesbank Berlin 4.93 -1.5%
Landesbank BW 4.90 -2.0%
Lehman Brothers 4.95 -1.0%
Maria Fiorini Ramirez Inc 5.05 1.0%
Merk Investments 5.09 1.8%
Merrill Lynch 5.10 2.0%
MFC Global Investment Man 4.88 -2.4%
Moody's Economy.com 5.00 0.0%
Morgan Stanley & Co. 4.90 -2.0%
National Bank Financial 4.95 -1.0%
National City Corporation 4.90 -2.0%
Natixis 4.85 -3.0%
Nomura Securities Intl. 4.92 -1.6%
PNC Bank 4.90 -2.0%
RBS Greenwich Capital 4.90 -2.0%
Ried, Thunberg & Co. 4.90 -2.0%
Schneider Trading Associa 5.00 0.0%
Scotia Capital 4.90 -2.0%
Societe Generale 4.96 -0.8%
Standard Chartered 4.90 -2.0%
Stone & McCarthy Research 4.94 -1.2%
TD Securities 4.90 -2.0%
Thomson Financial/IFR 4.94 -1.2%
Unicredit MIB 5.15 3.0%
University of Maryland 5.03 0.6%
Wachovia Corp. 4.96 -0.8%
Wells Fargo & Co. 4.97 -0.6%
WestLB AG 4.95 -1.0%
Westpac Banking Co. 5.00 0.0%
Wrightson Associates 4.90 -2.0%
=============================================
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Posts
No comments:
Post a Comment