Sept. 21 (Bloomberg) -- An increase in sales of previously owned U.S. homes in August probably failed to make up for the prior month’s decline as rising unemployment and foreclosures weighed on the industry, economists said before today’s report.
Purchases climbed 1.7 percent to a 4.75 million annual rate after falling to a 4.67 million pace in July that was the slowest since November 2010, according to the median of 74 forecasts in a Bloomberg News survey.
Companies like Lennar Corp. say weaker consumer confidence and limited access to financing remain constraints on demand, even with mortgage rates at record lows. Concern over housing and the slowdown in the economy may prompt the Federal Reserve today to propose new measures to shore up the recovery.
“We can expect a modest pop in sales for August, though this is certainly not the beginning of a new lease on life for housing,” said Millan Mulraine, senior U.S. strategist at TD Securities Inc. in New York. “For demand to improve, homebuyers need to have more clarity and certainty on the direction of the economy and on what’s happening to the job market.”
The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ estimates ranged from 4.5 million to 4.99 million.
The residential real estate industry, which helped trigger the recession, is struggling more than two years into the economic recovery that began in June 2009. Housing starts in August dropped 5 percent to a 571,000 annual rate, the slowest in three months, Commerce Department figures showed yesterday.
Miami-based Lennar, the third-largest U.S. homebuilder by revenue, reported a 31 percent drop in profit in the quarter ended Aug. 31 as sales fell. The housing market remains “challenging,” with “already skittish customers” being driven away by burdensome mortgage-qualification rules, Chief Executive Officer Stuart Miller said on a conference call.
At the same time, home prices that have decreased to attractive levels and interest rates on 30-year loans at record lows are reviving interest among potential buyers, he said.
“Demand remained constrained however by the availability of financing and general consumer confidence,” Miller said on the Sept. 19 conference call. There’s also “evidence that the consumer is beginning to return in earnest to the homebuilding market.”
Most builders remain pessimistic. The National Association of Home Builders/Wells Fargo sentiment index dropped to 14 in September, a three-month low, from 15 the prior month, the Washington-based group reported this week. Readings less than 50 mean more respondents said conditions were poor. Gauges of prospective buyer traffic, current sales and purchase expectations declined.
That helps explain why builders have fared worse than the broader stock market. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar, has declined about 25 percent so far this year, compared with a 4.4 percent drop for the S&P 500 Index.
Fed Chairman Ben S. Bernanke this month said that while the housing sector was a significant driver of recovery from most U.S. recessions since World War II, this time it has fallen short. He cited an overhang of distressed and foreclosed houses, tight credit conditions for builders and potential homebuyers, and concerns by borrowers and lenders about price declines.
“The weakness of the housing sector and continued financial volatility are two key reasons for the frustratingly slow pace of the recovery,” Bernanke said in a speech in Minnesota on Sept. 8.
Bernanke and fellow members of the Fed’s Open Market Committee are expected to release a statement around 2:15 p.m. Economists project the Fed will announce a program for monetary easing.
The central bank will decide to replace short-term Treasuries in its $1.65 trillion portfolio with long-term bonds, according to 71 percent of 42 economists surveyed by Bloomberg. The move, known as “Operation Twist” for its goal to bend the yield curve, will probably fail to reduce the 9.1 percent unemployment rate, 61 percent of the economists said.
--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Carlos Torres
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