(Updates with jobless claims in second paragraph.)
Oct. 20 (Bloomberg) -- Sales of existing U.S. homes probably fell in September, extending a pattern of gains and losses that shows the industry is being buffeted by a lack of jobs and confidence, economists said before a report today.
Purchases declined 2.5 percent to a 4.91 million annual rate, according to the median of 77 economists surveyed by Bloomberg News. A Labor Department report today on claims for unemployment benefits showed scant improvement in the pace of dismissals.
Growing pessimism about the economy, unemployment above 9 percent and limited access to credit are keeping some Americans from taking advantage of near record-low mortgage rates. Foreclosures that are adding to the supply of homes for sale and driving down prices remain a hurdle for an industry that’s made little progress more than two years after the recession ended.
“Weakness in housing isn’t going to change in the short or medium term,” said Jennifer Lee, an economist at BMO Capital Markets in Toronto. “Talk of recession or slowdown, an uncertain job market and volatile financial markets are holding back activity.”
The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ estimates ranged from 4.7 million to 5.1 million.
Jobless claims dropped by 6,000 to 403,000 in the week ended Oct. 15, today’s Labor Department figures showed. The median forecast in a Bloomberg News survey called for a drop to 400,000 applications. The four-week average fell to the lowest level since April.
A glut of distressed properties on the market is holding down prices, keeping housing from contributing to the economic rebound. Unemployment has been 9.1 percent for the last three months, wages are stagnate and stock prices have dropped this year on concerns about a European sovereign debt default and recession.
Default notices rose 14 percent in the third quarter from the prior three months, a sign lenders may be speeding up the repossession process, RealtyTrac Inc. said last week. Foreclosure filings declined 34 percent in the third quarter from a year earlier as states continued to probe allegations of foreclosure “robo-signings” and lenders scrutinized paperwork, according to RealtyTrac.
Housing prices keep falling even in the face of near-record low lending rates. The S&P/Case-Shiller index of property values in 20 cities dropped 4.1 percent in July from a year earlier, the group said Sept. 27. Prices were 31 percent below their July 2006 peak.
The average rate for a 30-year fixed loan dropped to 3.94 percent in the first week of October, the lowest in records dating back to 1971, according to Freddie Mac.
Cheaper borrowing costs may help explain why homebuilders were less pessimistic in October. The National Association of Home Builders/Wells Fargo sentiment index unexpectedly increased to 18, the highest level since May 2010, figures showed this week. Readings less than 50 mean more respondents said conditions were poor.
Scottsdale, Arizona-based Meritage Homes Corp., which builds energy-efficient single-family homes, saw its sales in the quarter ended in September rise from a year earlier even as demand remains at “depressed levels,” executive vice president Brent Anderson said on an Oct. 12 conference call.
“We need to have more people in jobs, good, well-paying, full-time jobs,” Anderson said. “It’s really a matter of confidence.”
Builders have fared worse than the broader stock market. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Meritage and Lennar Corp., has slumped about 21 percent so far this year, compared with a 3.8 percent drop for the S&P 500.
Federal Reserve Chairman Ben S. Bernanke said Oct 4 that the central bank was ready to take further steps to boost an economy that he said was “close to faltering.” Speaking before Congress’s Joint Economic Committee, Bernanke said home construction was not aiding the expansion, unlike in prior recoveries.
He said “the overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of ‘underwater’ mortgages” have hurt home construction.
--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Carlos Torres
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