U.S. November Existing-Home Sales Probably Matched Record Low
Sales of existing homes in the U.S. matched a record low in November, a sign the housing recession will continue to weigh on the economy in 2008, economists said before a report today.Purchases were unchanged at a 4.97 million annual pace for a second month, according to the median forecast of 53 economists surveyed by Bloomberg News. That’s down 31 percent from their September 2005 peak.
“Demand for housing will remain weak,” said Brian Bethune, an economist at Global Insight Inc., a Lexington, Massachusetts forecasting firm. “We don’t expect any major change in the overall trend in housing.”
Mortgage loans have become harder to get since banks tightened lending guidelines after the collapse in the subprime market, suggesting sales will keep falling. Rising foreclosures are adding to the glut of unsold homes, pulling down home prices and posing a threat to consumer spending, economists said.
The report from the National Association of Realtors is due at 10 a.m. in Washington. Economists’ forecasts ranged from 4.7 million to 5.15 million.
Declines in home construction have detracted from growth for the last seven quarters and are likely to keep weighing on the expansion, according to Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York.
“The housing pain looks likely to continue through 2009,” Harris wrote in a Dec. 20 note to clients. He predicted “sales and starts to fall through the middle of 2008, gradually rising in 2009.”
Prices Decline
Home prices in 20 metropolitan areas fell 6.1 percent in October from a year earlier, the biggest decline in at least six years, according to the S&P/Case-Shiller home price index issued last week. Lehman Brothers is forecasting prices will fall at least 15 percent from peak to trough.
Falling prices leave owners feeling poorer and less likely to borrow against home equity to finance purchases. Consumer spending, which accounts for more than two-thirds of the economy, may grow at a 1.5 percent pace in the fourth quarter, almost half the rate of the previous three months, economists surveyed by Bloomberg forecast.
The odds of a recession in the next 12 months rose to 39 percent in December from 33.6 percent the prior month, according to the median forecast of economists surveyed by Blue Chip Economic Indicators. The last recession was in 2001, when the economy grew 0.8 percent.
Sales Slump
Sales of new homes, which make up about 15 percent of the market, fell 9 percent in November to a 12-year low, the government said Dec. 28. Purchases were down 53 percent in November from their July 2005 peak. Existing homes make up the remainder of the market.
Sellers are cutting prices and builders are scaling back projects to trim a glut of inventories of unsold homes. At the current sales pace, it would take 10.8 months to sell all the existing homes on the market in October.
“Once we are through absorbing the excess inventory, the supply that’s in the marketplace, we will go back to doing good business,” Robert Toll, chief executive officer of Toll Brothers Inc., the largest luxury-home builder, said on a conference call earlier this month. “This downturn may be our toughest yet,” said Toll.
Bloomberg Survey ============================================== Exist Home Exist Home Sales Sales Millions MOM% ============================================== Date of Release 12/31 12/31 Observation Period Nov. Oct. ---------------------------------------------- Median 4.97 0.0 Average 4.96 -0.1 High Forecast 5.15 3.6 Low Forecast 4.70 -5.4 Number of Participants 53 53 Previous 4.97 -1.2 ---------------------------------------------- 4CAST Ltd. 5.05 1.6 Action Economics 5.03 1.2 Analytical Synthesis 4.70 -5.4 Argus Research Corp. 5.00 0.6 Banc of America Securitie 5.02 1.0 Bank of Tokyo- Mitsubishi 4.95 -0.4 Barclays Capital 5.00 0.6 BMO Capital Markets 5.00 0.6 BNP Paribas 5.15 3.6 Briefing.com 5.00 0.6 Calyon 4.90 -1.4 CIBC World Markets 4.97 0.0 Citi 5.02 1.0 ClearView Economics 4.80 -3.4 Commerzbank AG 4.90 -1.4 Credit Suisse 4.95 -0.4 Daiwa Securities America 4.90 -1.4 Desjardins Group 4.80 -3.4 Deutsche Bank Securities 4.95 -0.4 Dresdner Kleinwort 5.00 0.6 First Trust Advisors 5.07 2.0 Global Insight Inc. 4.96 -0.2 Helaba 4.93 -0.8 HSBC Markets 5.05 1.6 IDEAglobal 4.90 -1.4 Informa Global Markets 5.00 0.6 Insight Economics 4.85 -2.4 Intesa-SanPaulo 5.00 0.6 J.P. Morgan Chase 5.00 0.6 Janney Montgomery Scott L 4.93 -0.8 JPMorgan Private Client 4.94 -0.6 Landesbank Berlin 5.00 0.6 Maria Fiorini Ramirez Inc 5.00 0.6 Merrill Lynch 4.95 -0.4 Moody's Economy.com 4.89 -1.6 Morgan Stanley & Co. 4.95 -0.4 National City Bank 5.05 1.6 Natixis 4.90 -1.4 Nomura Securities Intl. 4.95 -0.4 PNC Bank 4.80 -3.4 RBS Greenwich Capital 4.97 0.0 Ried, Thunberg & Co. 5.00 0.6 Scotia Capital 5.00 0.6 Societe Generale 5.00 0.6 Stone & McCarthy Research 4.96 -0.2 Thomson Financial/IFR 4.97 0.0 UBS Securities LLC 5.02 1.0 University of Maryland 5.04 1.4 Wachovia Corp. 4.95 -0.4 Wells Fargo & Co. 5.03 1.2 WestLB AG 4.95 -0.4 Westpac Banking Co. 4.97 0.0 Wrightson Associates 5.00 0.6 ==============================================
Bloomberg
Posted: January 4th, 2008 under .