Pending U.S. Home Resales Probably Fell in July as Rates Rose

By Timothy R. Homan

Sept. 9 (Bloomberg) -- Fewer Americans signed contracts in July to purchase previously owned homes, a sign that falling home prices aren't enough to bring buyers back into the market, economists said before a private report today.

The index of pending home resales fell 1.5 percent after a gain of 5.3 percent in June, according to the median forecast in a Bloomberg News survey of 39 economists. The decline would be the fourth so far this year as tighter credit conditions keep would-be buyers from taking advantage of lower prices.

Thirty-year fixed rate mortgages averaged 6.29 percent in July, up from an average of 5.81 percent in the first half of the year. The U.S. government's takeover of Fannie Mae and Freddie Mac, which own or guarantee almost half of American home loans, aims to ensure that mortgage funds remain available and to minimize further declines in the housing market.

``More houses are coming into the market because of foreclosures, and those are driving prices down,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York. ``The trend might be a little better going forward on pending home resales because of the drastic price reductions, but that would not necessarily be an indication that the housing market is healthy.''

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 3.5 percent to a gain of 2 percent.

Wholesale Inventories

A separate report today from the Commerce Department may show that wholesale inventories in July increased 0.7 percent, the smallest gain since March, after rising 1.1 percent the previous month, according to the median estimate of economists surveyed.

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 August existing home sales are due Sept. 24. Purchases in July rose 3.1 percent to a 5 million annual pace from a 4.85 million rate the prior month, with at least one-third of the sales coming from foreclosed properties. At the July sales rate, it would take 11.2 months to sell all the houses on the market, about twice the supply that reflects a balanced market, according to the agents' group.

Increasing Foreclosures

Other measures also show how bank seizures may push down home prices and suppress sales. Foreclosures increased to the fastest pace in almost three decades during the second quarter, the Mortgage Bankers Association in Washington said in a report last week.

Home prices in 20 U.S. metropolitan areas fell 15.9 percent in June from a year earlier, the most on record, the S&P/Case- Shiller home-price index showed on Aug. 26.

Homebuilders are struggling to maintain profits as they compete with a glut of unsold properties on the market. Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its fourth straight quarterly loss last week.

``Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers' market,'' Chief Executive Robert Toll said on a conference call with analysts Sept. 4. ``Once the supply of foreclosed inventory is exhausted, we believe that favorable demographics will kick in and the housing market in general will begin to recover.''

Bloomberg Survey

=============================================
                           Whlsale  Pending
                              Inv.    Homes
                              MOM%     MOM%
=============================================

Date of Release              09/09    09/09
Observation Period            July     July
---------------------------------------------
Median                        0.7%    -1.5%
Average                       0.7%    -1.6%
High Forecast                 1.0%     2.0%
Low Forecast                  0.3%    -3.5%
Number of Participants          34       39
Previous                      1.1%     5.3%
---------------------------------------------
4CAST Ltd.                    0.6%    -1.5%
Action Economics              0.9%    -1.0%
AIG Investments               0.3%    -3.5%
Argus Research Corp.          0.4%     ---
Bank of Tokyo- Mitsubishi     0.9%     ---
BBVA                          0.5%    -1.3%
BMO Capital Markets           0.8%    -1.0%
BNP Paribas                   0.4%     ---
Briefing.com                  0.5%     2.0%
Calyon                        0.8%    -1.2%
CFC Group                     0.6%    -1.3%
Commerzbank AG                ---     -2.5%
Credit Suisse                 1.0%     ---
DekaBank                      ---     -1.1%
Desjardins Group              0.7%     ---
Deutsche Bank Securities      0.7%    -1.5%
Dresdner Kleinwort            ---     -1.5%
DZ Bank                       ---     -1.0%
Fortis                        0.8%    -3.3%
FTN Financial                 ---     -1.0%
H&R Block Financial Advis     0.6%    -1.0%
High Frequency Economics      0.8%    -2.0%
Horizon Investments           0.4%    -3.0%
HSBC Markets                  ---     -0.5%
IDEAglobal                    ---     -2.5%
Informa Global Markets        0.5%    -2.5%
ING Financial Markets         0.7%     0.0%
Insight Economics             0.6%     ---
J.P. Morgan Chase             ---     -3.0%
JPMorgan Private Client       0.4%    -1.0%
Landesbank Berlin             0.7%     ---
Lehman Brothers               0.5%    -2.0%
Lloyds TSB                    ---     -1.0%
Merk Investments              0.7%    -1.3%
Merrill Lynch                 0.9%     ---
Moody's Economy.com           ---     -2.5%
National City Corporation     ---     -2.0%
Natixis                       ---     -2.0%
Ried, Thunberg & Co.          0.8%    -3.0%
Schneider Trading Associa     0.6%    -0.9%
Stone & McCarthy Research     1.0%     ---
Thomson Financial/IFR         0.7%     0.2%
UBS Securities LLC            ---     -3.0%
University of Maryland        0.6%    -0.6%
Wells Fargo & Co.             0.9%    -2.1%
WestLB AG                     ---     -1.2%
Westpac Banking Co.           0.5%    -2.5%
Wrightson Associates          0.8%    -3.0%
=============================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net