Home Resales in U.S. Probably Increased in June for Third Month

Home Resales in U.S. Probably Increased in June for Third Month


July 23 (Bloomberg) -- Home resales in the U.S. probably rose in June for a third consecutive month, spurred by tax incentives, lower borrowing costs and foreclosure-driven declines in prices, economists said before a report today.

Purchases climbed 1.5 percent to an annual rate of 4.84 million, the highest level since October, according to the median estimate of 68 economists surveyed by Bloomberg News. Another report may show jobless claims rose last week.

A gain in sales would confirm a moderation in the worst housing slump in eight decades, as flagged by Federal Reserve Chairman Ben S. Bernanke this week. A record drop in household wealth, caused in part by the plunge in property values, and mounting unemployment are among reasons the rebound in housing and the economy is likely to be drawn out.

“Market-clearing price levels are resulting from the foreclosure wave,” said John Ryding, chief economist at RDQ Economics LLC in New York. “This will be a protracted bottom, rather than anything that will show a quick recovery.”

The home resales report from the National Association of Realtors is due at 10 a.m. in Washington. Survey estimates ranged from 4.7 million to 5 million.

At 8:30 a.m., a report from the Labor Department may show first-time applications for jobless benefits rose by 33,000 to 555,000 in the week ended July 18, economists forecast. The number of workers filing claims dropped by 95,000 over the previous two weeks, reflecting changes in the timing of mid-year auto shutdowns to retool for the new model year.

Seasonal Changes

June traditionally is one of the top months for home sales months as families prepare to move before the start of the next school term, according to the NAR. The group adjusts the figures for these seasonal variations in order to facilitate month-to- month comparisons.

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 8 percent since April 30, even as the S&P 500 index is up 9.3 percent.

Existing sales reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. The median price reached a six-year low the same month, extending the decline from July 2006’s record to 28 percent.

Foreclosures have accelerated the drop in prices. More than 1.5 million homeowners had their homes seized by banks or received default or auction notices in the first half of the year, a 15 percent increase from a year earlier and a record, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said July 16.

Lower Prices

Falling property values have both helped and hurt demand. Some Americans who owe more on their mortgages than their homes are worth can’t sell their properties to trade up or to move to areas of the country where more jobs are available.

Seeking to stem the slump in sales and lower borrowing costs, Fed policy makers committed to a $1.25 trillion program to purchase securities backed by home loans. Those purchases, as well as direct government purchases of Treasuries, drove rates on 30-year mortgages to a record low 4.78 percent in April, according to figures from Freddie Mac.

In addition, the Obama administration’s stimulus plan provided an $8,000 tax credit for first-time home buyers for purchases completed before Dec. 1.

Growing joblessness may be diluting the effectiveness of these government efforts. With unemployment at a quarter-century high of 9.5 percent and forecast to rise further, more Americans may be unwilling to make big-ticket purchases. Banks have also made it harder to obtain loans for those without good credit.

Wells Fargo & Co., the biggest U.S. home lender, yesterday said bad loans jumped in the second quarter as the recession made it harder for borrowers to keep up with payments. Assets no longer collecting interest climbed 45 percent as of June 30 from the first quarter, the San Francisco-based bank said.

Chief Financial Officer Howard Atkins said in an interview that nonaccrual loans from its acquisition of Wachovia Corp. will moderate in the coming quarters.

bloomberg