By Bob Willis
Sept. 21 (Bloomberg) -- U.S. home sales and orders for long-lasting goods probably fell in August, indicating growth had already slowed heading into the latest financial meltdown, economists said before reports this week.
Combined sales of new and existing homes dropped to a 5.45 million pace last month, down 1.2 percent from July, according to the median estimate of economists surveyed by Bloomberg News. Orders for durable goods, products meant to last several years, probably fell 1.8 percent.
``There was a fairly significant slowdown in progress even before we got to the financial fireworks,'' said Brian Bethune, director of financial economics at Global Insight Inc. in Lexington, Massachusetts.
The three-year housing slump that precipitated the subprime crisis, triggering losses that brought down giants such as Lehman Brothers Holdings Inc. and American International Group Inc., may spell the end of the economic expansion. Consumers are unlikely to benefit immediately from federal efforts to shield financial firms from tainted assets.
``The government's bailout plan may be great for investors, but it doesn't do much for the economy over the near-term,'' said Russell Price, a senior economist at H&R Block Financial Advisors in Detroit. ``Consumers are still going to find financing everything from homes to big-ticket appliances tough to come by.''
The National Association of Realtors' report on home resales is due Sept. 24. Purchases declined to a 4.94 million annual pace from 5 million in July, according to the survey median. Sales reached a 4.85 million pace in June, the fewest since comparable records began in 1999.
New-Home Sales
A day later, 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 survey estimates. Sales of existing and new homes are down 35 percent from their July 2005 peak.
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.''
No Bottom
Hovnanian said sales in ``some select markets,'' such as northern California and the Washington suburbs in Virginia, ``have really started to pick up.'' It's ``absolutely'' too early to call a bottom for the market, he said.
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.
``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,'' the Federal Reserve said Sept. 16 as it held the benchmark lending rate unchanged at 2 percent.
Three days later, the government announced it would move to cleanse banks of troubled assets as part of a plan that Treasury Secretary Henry Paulson said would cost ``hundreds of billions.''
The report on durable goods, due from the Commerce Department on Sept. 25, is also projected to show that orders excluding transportation equipment fell 0.5 percent in August, according to the Bloomberg survey.
Auto Slump
Automakers have led the slump in durables. Sales of cars and light trucks over the last three months were the weakest since 1993, according to Bloomberg calculations based on industry figures.
Struggling to regain market share from foreign carmakers, General Motors Corp., Ford Motor Co. and Chrysler LLC last week urged U.S. lawmakers to fund $25 billion in low-interest loans to help develop more fuel-efficient vehicles.
``Your urgent attention to this issue is critical to the future of the American economy and the manufacturing sector,'' GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli, chief executive officers of the three U.S.-based automakers, wrote to House Speaker Nancy Pelosi.
On Sept. 26, the Reuters/University of Michigan final estimate of consumer sentiment for September may show confidence rose for a third month after reaching a 28-year low in June as gasoline prices tumbled.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Exist Homes Mlns 9/24 Aug. 5.00 4.94
Exist Homes MOM% 9/24 July 3.1% -1.2%
Durables Orders MOM% 9/25 Aug. 1.3% -1.8%
Durables Ex-Trans MOM% 9/25 Aug. 0.7% -0.5%
Initial Claims ,000's 9/25 Sept. 20 455 448
Cont. Claims ,000's 9/25 Sept. 13 3478 3505
New Home Sales ,000's 9/25 Aug. 515 510
New Home Sales MOM% 9/25 Aug. 2.4% -1.0%
GDP Annual QOQ% 9/26 2Q F 3.3% 3.3%
Personal Consump. QOQ% 9/26 2Q F 1.7% 1.7%
GDP Prices QOQ% 9/26 2Q F 1.2% 1.2%
Core PCE Prices QOQ% 9/26 2Q F 2.1% 2.1%
U of Mich Conf. Index 9/26 Sept. F 73.1 70.5
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To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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