By Bob Willis
Oct. 24 (Bloomberg) -- Home resales in the U.S. probably rose in September, aided by foreclosure-driven declines in prices that made properties more affordable, economists said before a report today.
Purchases of existing homes rose 0.8 percent last month to a 4.95 million annual pace, just over the 4.94 million average so far this year, according to the median estimate of economists surveyed by Bloomberg News.
``Banks are foreclosing and selling homes at fire-sale prices and that is driving this,'' said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. ``A jump in existing sales would be a one-month thing -- they'll continue falling.''
The boost to sales from lower prices may be short-lived as banks withhold financing on mounting concern that record foreclosures will hurt profits and depress values even more. The collapse in lending signals the housing recession will extend well into a fourth year.
The National Association of Realtors' resales report is due at 10 a.m. in Washington. Estimates of the 66 economists surveyed ranged from 4.7 million to 5.11 million.
Purchases dropped to a 4.86 million rate in June, the lowest in a decade and down 33 percent from the record reached in September 2005.
New-Home Sales
The market for new houses is even worse off as builder discounts haven't matched the cut in prices on foreclosed properties.
The Commerce Department is forecast to report Oct. 27 that sales of new houses dropped to an annual pace of 455,000, a 17- year low, from 460,000 in August, according to the survey median. Sales are down about 67 percent from the record reached in 2005.
Average prices are down by a fifth from peaks reached in mid-2006, according to the S&P/Case Shiller Home Price Index of 20 metropolitan areas. Falling values make it harder to refinance mortgages, pushing up foreclosures in August to the highest since record-keeping began in 2005, according to Realtytrac.com.
Declines in home equity have undermined consumer spending as owners have less cash to tap. A cascade of bank losses and failures has led to the most severe financial crisis in seven decades. Most economists are forecasting a recession in the U.S. and a global slowdown.
Construction Slump
As home sales shrank, builders scaled back construction projects by 64 percent through September from a peak in January 2006, the biggest decline since at least 1959. Work began last month on the fewest single-family homes in 26 years, the Commerce Department reported last week. The number of building permits issued also fell, a sign that declines in construction will continue to hurt the economy.
``The housing downswing is really not exactly even nearing a bottom at this point,'' David Seiders, chief economist at the National Association of Homebuilders said Oct. 17 in an interview with Bloomberg Television. ``The core problem in the economy is still housing, and house prices are decimating the financial markets.''
Construction companies continue to struggle. Pulte Homes Inc., the third-largest U.S. builder, this week reported a net loss of $280.4 billion for the third quarter, more than double what analysts had projected.
``A bottom in the housing market may not come for some time,'' Chief Executive Officer Richard Dugas said on a conference call yesterday.
Bloomberg Survey
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Exist Exist
Homes Homes
Mlns MOM%
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Date of Release 10/24 10/24
Observation Period Sept. Aug.
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Median 4.95 0.8%
Average 4.95 0.8%
High Forecast 5.11 4.1%
Low Forecast 4.70 -4.3%
Number of Participants 66 66
Previous 4.91 -2.2%
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4CAST Ltd. 5.05 2.9%
Action Economics 4.87 -0.8%
Aletti Gestielle SGR 4.80 -2.2%
Argus Research Corp. 4.95 0.8%
Banc of America Securitie 4.90 -0.2%
Bank of Tokyo- Mitsubishi 4.94 0.6%
Barclays Capital 5.10 3.9%
BMO Capital Markets 5.00 1.8%
BNP Paribas 5.10 3.9%
Briefing.com 4.97 1.2%
Calyon 5.00 1.8%
CFC Group 4.96 1.0%
CIBC World Markets 4.80 -2.2%
Citi 5.00 1.8%
Commerzbank AG 5.00 1.8%
Credit Suisse 4.94 0.6%
Daiwa Securities America 4.80 -2.2%
Danske Bank 4.95 0.8%
DekaBank 5.10 3.9%
Desjardins Group 4.90 -0.2%
Deutsche Bank Securities 4.75 -3.3%
Dresdner Kleinwort 5.01 2.0%
DZ Bank 4.90 -0.2%
First Trust Advisors 4.79 -2.4%
Fortis 5.00 1.8%
FTN Financial 4.89 -0.4%
Global Insight Inc. 5.10 3.9%
Goldman, Sachs & Co. 4.86 -1.0%
H&R Block Financial Advis 4.96 1.0%
Helaba 5.00 1.8%
High Frequency Economics 5.10 3.9%
HSBC Markets 5.05 2.9%
IDEAglobal 4.85 -1.2%
Informa Global Markets 5.05 2.8%
ING Financial Markets 5.11 4.1%
Insight Economics 4.90 -0.2%
Intesa-SanPaulo 5.00 1.8%
J.P. Morgan Chase 5.00 1.8%
Janney Montgomery Scott L 4.91 0.0%
Landesbank Berlin 5.05 2.9%
Landesbank BW 4.95 0.8%
Lloyds TSB 4.95 0.8%
Maria Fiorini Ramirez Inc 4.80 -2.2%
Merk Investments 4.70 -4.3%
Merrill Lynch 4.90 -0.2%
Moody's Economy.com 4.99 1.6%
National Bank Financial 4.90 -0.2%
Natixis 5.01 2.0%
Nomura Securities Intl. 4.90 -0.2%
PNC Bank 4.91 0.0%
RBS Greenwich Capital 5.00 1.8%
Ried, Thunberg & Co. 5.10 3.9%
Schneider Trading Associa 5.04 2.7%
Scotia Capital 4.80 -2.2%
Societe Generale 4.93 0.4%
TD Securities 4.86 -1.0%
Thomson Financial/IFR 4.88 -0.6%
Tullett Prebon 4.97 1.2%
UBS Securities LLC 5.06 3.0%
Unicredit MIB 4.90 -0.2%
University of Maryland 5.10 3.9%
Wachovia Corp. 4.75 -3.3%
Wells Fargo & Co. 4.87 -0.8%
WestLB AG 4.88 -0.6%
Westpac Banking Co. 5.06 3.1%
Wrightson Associates 5.10 3.9%
==============================================
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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