By Bob Willis
Dec. 23 (Bloomberg) -- Sales of new and existing homes in the U.S. fell in November to a nine-year low as a scarcity of credit and falling consumer confidence dissuaded potential buyers, economists said before reports today.
Purchases dropped 1.4 percent to an annual pace of 5.345 million units, according to estimates of economists surveyed by Bloomberg News. Combined sales at that level would show demand weaker than the 5.349 million pace in June that was the lowest since 1999, when the latest series of existing-home sales statistics began.
The U.S. housing recession and credit crisis may extend into 2009, signaling little relief for the broader economy. The Federal Reserve last week dropped its target rate to as low as zero to spur lending, while President-elect Barack Obama has pledged to work to halt foreclosures, boost housing and provide a boost to the economy.
“Underlying demand is still very weak,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. “The worst postwar housing recession has contributed to arguably the worst postwar capital-market crisis and a severe U.S. recession.”
New-home sales may drop to a 415,000 annual pace, the lowest level since January 1991, according to the median estimate in a Bloomberg survey of 65 economists. Forecasts ranged from 343,000 to 435,000.
Existing-home sales may decline to a 4.93 million rate from 4.98 million the prior month, according to 63 economists surveyed by Bloomberg. Estimates ranged from 3.98 million to 5.2 million.
Signed Contracts
New-home sales are a better leading indicator because they track contract signings rather than closings, which occur one or two months later and are reflected in the existing sales figures.
The Commerce Department will report the new-home sales number at 10 a.m. in Washington, and the National Association of Realtors will report existing sales at the same hour.
Sales and home prices have been falling since 2005, when the housing boom peaked. Declining home construction has detracted from economic growth since early 2006, while home prices that have fallen by about a fifth on average sent foreclosures surging to record levels. That touched off a wave of defaults on mortgage-backed securities that infected the global banking system, creating a spiral of falling prices, tighter credit and slumping spending.
“Declining house prices, delinquencies and foreclosures and strains in mortgage markets are now symptoms as well as causes of the general financial and economic difficulties,” Fed Chairman Ben S. Bernanke said Dec. 4 at a conference in Washington.
Bank Failures
Lending has dried up, banks have failed and 1.9 million Americans have lost their jobs this year, as the economy struggles with its first recession since 2001. The Federal Reserve has led coordinated rate cuts around the world to bolster capital markets and revive credit.
Noting that “the outlook for economic activity has weakened further,” the Fed on Dec. 16 cut its key target rate to as low as zero from 1 percent and pledged to “employ all available tools” to restore growth in the flagging economy.
Also today, the Reuters/University of Michigan final index of consumer sentiment will show the gauge rose to 58.8 in December, reflecting falling gasoline prices, from a 28-year low of 55.3 in November, according to economists surveyed. That report will be released shortly before 10 a.m.
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New Home Existing
Sales Homes
(,000’s) (Mlns)
============================================
Date of Release 12/23 12/23
Observation Period Nov. Nov.
--------------------------------------------
Median 415 4.93
Average 410 4.90
High Forecast 435 5.20
Low Forecast 343 3.98
Number of Participants 65 63
Previous 433 4.98
--------------------------------------------
4CAST Ltd. 395 4.80
Action Economics 420 4.96
Aletti Gestielle SGR 405 4.80
Ameriprise Financial Inc 415 4.89
Argus Research Corp. 420 4.75
Banc of America Securitie 420 4.80
Bank of Tokyo- Mitsubishi 389 4.98
Bantleon Bank AG 400 4.96
Barclays Capital 410 4.93
BMO Capital Markets 415 4.85
BNP Paribas 415 4.93
Briefing.com 425 4.95
CIBC World Markets 400 4.80
Citi 420 4.90
Commerzbank AG 415 5.00
Credit Suisse 380 4.90
Daiwa Securities America 420 4.80
Danske Bank 409 4.97
DekaBank 400 4.93
Desjardins Group 415 4.90
Dresdner Kleinwort 420 4.95
DZ Bank 425 ---
First Trust Advisors 390 4.94
Fortis 435 4.95
Goldman, Sachs & Co. 422 4.86
Helaba 420 4.93
Herrmann Forecasting 428 4.93
HSBC Markets 420 4.90
IDEAglobal 425 4.85
IHS Global Insight 360 4.88
Informa Global Markets 420 5.20
ING Financial Markets 415 4.95
Intesa-SanPaulo 400 4.90
J.P. Morgan Chase 420 4.93
Janney Montgomery Scott L 406 4.82
Landesbank Berlin 425 5.03
Maria Fiorini Ramirez Inc 410 4.95
Merrill Lynch 420 4.93
MFC Global Investment Man 410 4.85
Mizuho Securities 411 ---
Moody’s Economy.com 420 4.93
Morgan Stanley & Co. 400 4.90
National Bank Financial 420 4.95
National City Corporation 398 4.90
Natixis 415 4.83
Nomura Securities Intl. 425 4.95
Okasan Securities 343 3.98
PNC Bank 400 4.95
Raymond James 410 4.90
RBS Greenwich Capital 380 4.90
Ried, Thunberg & Co. 410 4.95
Schneider Foreign Exchang 410 4.93
Scotia Capital 400 4.80
Societe Generale 400 4.90
Stone & McCarthy Research 405 4.96
TD Securities 420 4.90
Thomson Financial/IFR 428 5.04
Tullett Prebon 410 4.90
UBS Securities LLC 390 4.88
Unicredit MIB 425 4.93
University of Maryland 428 4.90
Wachovia Corp. 410 4.91
Wells Fargo & Co. 420 4.96
Westpac Banking Co. 381 4.93
Wrightson Associates 410 4.95
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To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
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