By Shobhana Chandra
Oct. 27 (Bloomberg) -- Home values in the U.S. kept stabilizing and consumer confidence rose, bolstering the case that an economic recovery is at hand, economists said before reports today.
The S&P/Case-Shiller index covering home prices in 20 cities fell 11.9 percent in August from a year earlier, the smallest drop in 19 months, according to the median forecast of economists surveyed by Bloomberg News. Sentiment this month climbed, a report from the Conference Board may show, even as Americans continue to fret over employment prospects.
Rising home sales, due in part to government programs including the first-time buyer credit and efforts to lower borrowing costs, have helped stem the slump in property values that precipitated the worst recession since the 1930s. Sustained gains in household spending, the biggest part of the economy, may be harder to come by as joblessness mounts.
“Home prices are clearly in a bottoming-out process and we’ll be at much more comfortable levels by next year,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “Consumers still face headwinds. The panic is over, but people need to see outright positive news on the horizon before we’ll get a big jump in confidence.”
The S&P/Case-Shiller figures, due at 9 a.m., would follow a 13.3 percent drop in the year ended July. Projections in the survey ranged from declines of 11 percent to 13.3 percent. Year-over-year records began in 2001. The gauge rose in June and July on a monthly seasonally adjusted basis.
Monthly Gain
Englund is among economists predicting the S&P/Case- Shiller report will show prices kept climbing in August compared with a month earlier. In July, the home-price index rose 1.2 percent from the prior month, the biggest gain since October 2005.
At 10 a.m., the New York-based Conference Board may report that its sentiment index rose in September to 53.5 from 53.1. Estimates in the Bloomberg survey ranged from 48 to 57.
In the latest evidence of rising demand, existing home sales in September jumped to a 5.57 million annual rate, more than economists forecast and the highest in more than two years, according to data from the National Association of Realtors issued last week.
Housing and manufacturing are leading the stabilization in the economy, the Federal Reserve said in the Beige Book survey of conditions in its 12 district banks during September and early October.
Fed Observation
“Most districts reported that housing market conditions improved in recent weeks, primarily from a pickup in sales of low- to middle-priced houses,” the Fed said.
One risk to the emerging stabilization is foreclosures, which worsen the property glut. Foreclosure rates will climb through late 2010, peaking only after the unemployment rate reaches 10.2 percent in the second quarter, Jay Brinkmann, chief economist at the Mortgage Bankers Association, said this month.
Unemployment, which is projected to exceed 10 percent by early 2010, according to the median estimate in a Bloomberg survey earlier this month, will also limit demand. Economists and industry groups are among those projecting home sales will also cool in the absence of the $8,000 credit for first-time buyers, due to expire Nov. 30. Lawmakers are debating extending the credit.
The Standard & Poor’s Supercomposite Homebuilding Index has climbed 22 percent since the beginning of July on the improving outlook for housing, compared with a 16 percent increase in the S&P 500 index. The builder index fell yesterday on concern that the tax-credit program may not be extended.
‘Low Level’
“The residential housing market appears to have stabilized, but it has done so at a very low level,” William Foote, chief executive officer of USG Corp., North America’s largest maker of gypsum wallboard, said Oct. 21 on a conference call. The Chicago-based company posted its eighth straight net loss last quarter as sales dropped 32 percent from a year ago.
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
Bloomberg Survey
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Case Shil Consumer
Monthly Conf
YOY% Index
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Date of Release 10/27 10/27
Observation Period Aug. Oct.
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Median -11.9% 53.5
Average -11.8% 53.3
High Forecast -11.0% 57.0
Low Forecast -13.3% 48.0
Number of Participants 33 74
Previous -13.3% 53.1
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4CAST Ltd. -11.9% 51.5
Action Economics --- 54.0
Aletti Gestielle SGR --- 52.0
Ameriprise Financial Inc --- 55.0
Argus Research Corp. --- 55.0
Banesto -11.3% 54.4
Bank of Tokyo- Mitsubishi --- 51.2
Bantleon Bank AG --- 54.5
Barclays Capital -12.0% 54.0
Bayerische Landesbank --- 53.0
BBVA -12.5% 54.6
BMO Capital Markets -12.3% 54.5
BNP Paribas --- 54.0
BofA Merrill Lynch Resear -11.0% 55.0
Briefing.com -13.0% 52.6
C I T I C Securities -12.1% 53.2
Calyon --- 54.0
Capital Economics -12.0% 54.0
CIBC World Markets --- 52.0
Citi --- 53.0
ClearView Economics -11.1% 55.0
Commerzbank AG -11.3% 55.0
Credit Suisse --- 53.0
Daiwa Securities America --- 54.0
Danske Bank --- 51.5
DekaBank --- 52.0
Desjardins Group -12.4% 53.5
Deutsche Bank Securities --- 55.0
Deutsche Postbank AG --- 54.5
DZ Bank -12.0% 53.5
First Trust Advisors --- 51.1
Fortis --- 55.0
Goldman, Sachs & Co. --- 52.0
Helaba --- 52.5
Herrmann Forecasting -12.5% 55.0
High Frequency Economics -11.5% 50.0
HSBC Markets -11.9% 52.0
Ibersecurities --- 52.5
IDEAglobal -11.5% 56.0
IHS Global Insight --- 52.5
Informa Global Markets --- 55.0
ING Financial Markets -11.8% 52.5
Insight Economics -11.3% 54.0
Intesa-SanPaulo --- 51.5
J.P. Morgan Chase -12.0% 53.0
Janney Montgomery Scott L -11.7% 53.0
Jefferies & Co. --- 55.0
Landesbank Berlin --- 48.0
Landesbank BW -11.0% 53.0
Maria Fiorini Ramirez Inc --- 53.5
MFC Global Investment Man --- 52.0
Moody’s Economy.com --- 51.0
Morgan Stanley & Co. --- 54.0
National Bank Financial --- 54.0
Natixis -12.0% 53.5
Newedge --- 53.5
Nomura Securities Intl. -13.3% ---
Nord/LB --- 52.5
RBS Securities Inc. --- 49.0
Ried, Thunberg & Co. -11.3% 54.0
Schneider Foreign Exchang --- 53.4
Scotia Capital -12.0% 53.1
Societe Generale --- 55.0
Standard Chartered -11.5% 53.5
Stone & McCarthy Research --- 51.0
TD Securities -11.3% 54.0
Thomson Reuters/IFR --- 54.0
UBS -11.8% 51.5
UniCredit Research -11.4% 57.0
University of Maryland -12.3% 54.2
Wells Fargo & Co. --- 53.2
WestLB AG --- 54.5
Westpac Banking Co. -11.3% 51.5
Woodley Park Research -12.5% 52.1
Wrightson Associates --- 54.0
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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