Sales of U.S. New Homes Fall for First Time in Three Months
(Updates with economist comment in fourth paragraph.)
June 23 (Bloomberg) -- Purchases of new U.S. houses fell in May for the first time in three months, showing the industry is struggling to gain momentum.
Sales dropped 2.1 percent to a 319,000 annual pace last month, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey of economists called for sales at a 310,000 rate. The median price of new homes sold dropped from a year earlier.
Builders will contend with the prospect that almost 2 million distressed properties will reach the market, which may take years to absorb as the jobless rate hovers around 9 percent. Federal Reserve Chairman Ben S. Bernanke, citing high unemployment and weakness in housing and the financial system, left the door open yesterday to easing further if needed.
“Things are still going to be weak for a while,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “We need to see much better job growth and more confidence in general,” he said, adding that new-home sales are “still sort of bouncing around the bottom.”
The median estimate in the Bloomberg survey was based on a poll of 67 economists. Forecasts ranged from 288,000 to 345,000. Sales in April were revised up to a 326,000 annual rate from the 323,000 previously reported.
More Americans than forecast filed claims for unemployment insurance payments last week, showing companies are less confident about the expansion than they were earlier this year, a report from the Labor Department also showed today.
Applications increased by 9,000 in the week ended June 18 to 429,000. The level exceeded the highest estimate in a Bloomberg survey of economists in which the median projection called for 415,000 filings.
Consumer confidence fell for the first time in five weeks as Americans grew more concerned about the economy, another report showed. The Bloomberg Consumer Comfort Index dropped to minus 44.9 in the period to June 19, from the prior week’s minus 44. The decline left the gauge close to its average for the year.
Stocks held earlier losses after the report, depressed by the claims data and by European Central Bank President Jean- Claude Trichet’s comments that the debt crisis threatened to infect banks. The Standard & Poor’s 500 Index fell 1.3 percent to 1,270.6 at 10:12 a.m. in New York.
The median sales price of a new home decreased 3.4 percent from May 2010 to $222,600, today’s Commerce Department report showed. It was biggest 12-month drop since October.
Sales fell in two of four regions, led by a 27 percent plunge in the Northeast. Demand dropped 3.5 percent in the West, was little changed in the Midwest and climbed 2.4 percent in the South.
Builders are trying to stay ahead of falling demand by cutting back on projects. There were a record-low 166,000 new houses on the market at the end of May, pushing the supply of homes at the current sales rate down to 6.2 months’ worth from 6.3 months in April. May’s months supply was the lowest since April 2010.
Housing starts increased more than forecast in May led by a jump in the West as other parts of the country faltered. Work began on 560,000 houses at an annual pace, exceeding the 545,000 median projection of economists surveyed by Bloomberg News, figures from the Commerce Department showed last week.
Competition from existing homes selling at discounted prices is hurting builders. The 1.8 million of inventory of distressed homes nationwide that may reach the market would take about three years to sell at the current pace, Daren Blomquist, communications manager at RealtyTrac Inc., said last week.
Previously owned homes sold at a 4.81 million annual rate in May, down 3.8 percent from the prior month, data from the National Association of Realtors showed this week. Sales of existing homes comprise about 94 percent of the housing market, up from about 85 percent six years ago, as foreclosures and distressed sales lure some buyers.
The housing market is weighing on other parts of the world’s largest economy, according to some company chiefs.
“We expect the recovery will continue to be slow and uneven, particularly for more moderate-income households,” Gregg Steinhafel, chairman and chief executive of Minneapolis-based Target Corp., the second largest U.S. discount retailer, told investors last month. “These households need to see further improvements in housing and income growth before they’ll have the capacity to meaningfully increase their discretionary spending.”
Fed policy makers are also concerned after the economy grew at a 1.8 percent annual pace in the first three months of the year, down from 3.1 percent in 2010’s fourth quarter.
“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said in a press conference yesterday following the central bank’s decision to maintain record stimulus. Referring to “frustratingly” slow job growth and weakness in the financial and housing industries, Bernanke said “some of these headwinds may be stronger and more persistent than we thought.”
The Fed would be “prepared to take additional action, obviously, if conditions warranted,” including the purchase of more Treasury securities, Bernanke said.
--With assistance from Chris Middleton in Washington. Editor: Carlos Torres
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