By Courtney Schlisserman
July 27 (Bloomberg) -- Sales of new homes in the U.S. probably rose in June to the highest level in four months, adding to evidence the housing slump that began in 2005 is stabilizing, economists said ahead of a government report today.
Sales increased 2.9 percent to a 352,000 pace, according to the median forecast of 60 economists surveyed by Bloomberg News. Purchases reached a record-low 329,000 pace in January.
Falling prices and near record-low mortgage rates have started to lure buyers even as the unemployment rate rises. The worst recession in five decades may end in coming months as the housing and manufacturing downturns ease.
“Home demand is stabilizing and that’s not surprising given the improvement in affordability,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “Home sales are likely to pick up from here.”
The Commerce Department is scheduled to release its report at 10 a.m. in Washington. Estimates in the Bloomberg News survey ranged from 335,000 to 377,000.
New-home sales have risen in two of the four months since the January low.
Other reports underscore the stabilization in housing. The Wells Fargo/National Association of Homebuilders sentiment index has risen in five of the past six months and existing home sales have increased for three months in a row.
Job Losses
Job losses threaten to limit any housing recovery. The U.S. has lost 6.5 million jobs since the recession began in December 2007 and economists surveyed by Bloomberg News forecast the unemployment rate will top 10 percent in early 2010. The jobless rate reached a quarter-century high of 9.5 percent in June.
Lower prices, while helping to revive demand, are hurting builders’ bottom lines. Record foreclosures have depressed the value of competing existing homes, prompting construction firms to also lower prices.
Builder shares have retreated in recent months on signs housing will not lead a recovery from the U.S. recession that began in December 2007. The Standard & Poor’s homebuilder supercomposite index is down 3 percent since April 30, even as the S&P 500 index is up 12 percent.
Federal Reserve policy makers have committed to a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs. Those purchases, as well as direct government purchases of Treasuries, drove the rate on 30-year mortgages to a record-low 4.78 percent in April, according to figures from Freddie Mac. Rates have since hovered around 5 percent.
Bernanke’s View
Fed Chairman Bernanke said July 21 that the economy is showing “tentative signs of stabilization” and the “decline in housing activity appears to have moderated.”
Another incentive is the $8,000 tax credit for first-time buyers that is part of the Obama administration’s economic stimulus plan. Purchases have to be completed before Dec. 1.
NVR Inc., the fourth-largest U.S. homebuilder, said last week that new orders increased 2 percent in the second quarter compared with a year earlier. The rate of cancellations fell to 14 percent from 19 percent in the second quarter of 2008 and 15 percent in the first three months of this year.
Bloomberg Survey
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New Home New Home
Sales Sales
,000’s MOM%
================================================================
Date of Release 07/27 07/27
Observation Period June June
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Median 352 2.9%
Average 354 3.5%
High Forecast 377 10.2%
Low Forecast 335 -2.1%
Number of Participants 60 60
Previous 342 2.7%
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4CAST Ltd. 375 9.7%
Action Economics 360 5.3%
AIG Investments 362 5.9%
Aletti Gestielle SGR 358 4.7%
Ameriprise Financial Inc 350 2.3%
Argus Research Corp. 345 0.9%
Bank of Tokyo- Mitsubishi 350 2.3%
Barclays Capital 350 2.3%
BBVA 344 0.6%
BMO Capital Markets 350 2.3%
BNP Paribas 360 5.3%
C I T I C Securities 347 1.5%
Calyon 350 2.3%
Capital Economics 370 8.2%
CIBC World Markets 345 0.9%
ClearView Economics 350 2.3%
Commerzbank AG 360 5.3%
Credit Suisse 360 5.3%
DekaBank 350 2.3%
Desjardins Group 355 3.8%
Deutsche Bank Securities 350 2.3%
DZ Bank 360 5.3%
Exane 360 5.3%
First Trust Advisors 352 2.9%
Fortis 350 2.3%
FTN Financial 340 -0.6%
Helaba 350 2.3%
Herrmann Forecasting 354 3.5%
HSBC Markets 365 6.7%
IDEAglobal 355 3.8%
Informa Global Markets 355 3.8%
ING Financial Markets 360 5.3%
Insight Economics 350 2.3%
Intesa-SanPaulo 340 -0.6%
J.P. Morgan Chase 350 2.3%
Janney Montgomery Scott L 352 2.9%
Johnson Illington Advisor 355 3.8%
JPMorgan’s Private Wealth 350 2.3%
Landesbank Berlin 350 2.3%
Landesbank BW 350 2.3%
Merrill Lynch/BAS 335 -2.1%
Moody’s Economy.com 360 5.3%
Morgan Keegan & Co. 363 6.1%
Natixis 350 2.3%
Nomura Securities Intl. 355 3.8%
PNC Bank 370 8.2%
Raymond James 345 0.9%
RBS Securities Inc. 355 3.8%
Schneider Foreign Exchang 377 10.2%
Scotia Capital 356 4.1%
Societe Generale 355 3.8%
Standard Chartered 370 8.2%
Stone & McCarthy Research 360 5.3%
TD Securities 360 5.3%
UniCredit Research 335 -2.1%
University of Maryland 350 2.3%
Wells Fargo & Co. 345 0.9%
WestLB AG 350 2.3%
Westpac Banking Co. 363 6.0%
Wrightson Associates 350 2.3%
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To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
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