Bloomberg News

Existing-Home Sales in U.S. Probably Dropped to Six-Month Low

June 21, 2011

June 21 (Bloomberg) -- Sales of previously owned U.S. homes probably fell in May to the lowest level this year, a sign that housing lags behind other parts of the economy, economists said before a report today.

Purchases fell 5 percent to a 4.8 million annual pace, the fewest since November, according to the median forecast of 69 economists surveyed by Bloomberg News. A 13-year low 4.91 million existing houses were sold last year.

An unemployment rate hovering around 9 percent and strict lending rules mean it may take years to absorb the 1.8 million distressed properties on the market that are weighing down home values. The state of the housing market is one reason why Federal Reserve policy makers are likely to maintain record stimulus when they meet this week.

“The housing recovery is still looking pretty distant,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Buyers lack the confidence and access to credit that are important to driving sales.”

The National Association of Realtors will release the figures at 10 a.m. in Washington. Estimates for home sales in the Bloomberg survey ranged from 4.5 million to 5.18 million.

The number of existing homes sold peaked at 7.08 million in 2005. Nonetheless, they comprise about 94 percent of all purchases now, up from about 85 percent six years ago as foreclosures and distressed sales lure some buyers.

Distressed Properties

The 1.8 million of inventory of distressed homes nationwide would take about three years to sell at the current pace, Daren Blomquist, communications manager at RealtyTrac Inc., said last week.

Competition from existing homes selling at discounted prices is hurting builders. Sales of new properties dropped 4 percent in May to a 310,000 annual pace, economists said ahead of a June 23 report from the Commerce Department. A record-low 323,000 new homes were sold last year.

“We still see housing demand at very weak levels,” Bill Wheat, chief financial officer at D.R. Horton Inc., the second- largest U.S. homebuilder by revenue, said last month at a housing conference in New York. “It could still be a struggle in 2012.”

Homebuilders are underperforming the overall market. The Standard & Poor’s 500 Homebuilding Index has declined 3.4 percent this year, compared with a 1.7 percent gain in the broader S&P 500 Index.

Fed Chairman Ben S. Bernanke has been among those forecasting that the recent slowdown in growth will prove temporary as commodity prices retreat. At the same time, the central bank should maintain record stimulus to bolster a “frustratingly slow” recovery, he said this month. Officials are scheduled to meet in Washington today and tomorrow to determine the course of policy.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Chris Wellisz

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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