Purchases of New Houses in U.S. Probably Increased in April

Demand for new U.S. homes probably increased in April as lower prices and mortgage interest rates drew buyers, economists said before a report today.

Purchases rose at a 335,000 annual rate, up 2.1 percent from 328,000 in March, according to the median forecast in a Bloomberg News survey of economists. Data released yesterday showed sales of previously owned homes rose in April in every region.

Job growth, affordability and record-low interest rates are bringing more single-family homes within reach of buyers, chipping away at a weakness in the world’s largest economy as risks from Europe’s debt crisis climb. Stricter bank lending standards and foreclosures that continue to move through the system mean a sustained housing recovery will take time to develop.

“Housing has turned and is engaged in a gradual recovery,” said Michael Gapen, a senior U.S. economist at Barclays Capital in New York. “There are drags and concerns but the trend is up.”

Estimates of the 72 economists in the Bloomberg survey ranged from 325,000 to 375,000. New-home sales are logged when purchase contracts are signed. The Commerce Department’s report is due at 10 a.m. in Washington.

Newly constructed houses made up 6.7 percent of the housing market last year, down from a high of 15 percent during the boom of the past decade, making them an unreliable predictor of the total single-family market. Buyers are taking advantage of the large inventory and affordability of previously owned homes.

Existing Homes

Sales of those existing homes, tabulated when a contract closes, increased 3.4 percent to a 4.62 million annual rate in April, just shy of the 4.63 million in January that was the highest in almost two years, the National Association of Realtors reported yesterday. Resales will rise to a 4.6 million to 4.7 million range this year, the group projected, from 4.26 million in 2011.

Owner-occupied properties were becoming a bigger share of sales of existing homes last month as investors who use all-cash deals to snap up distressed houses began playing a smaller role, the agents’ group reported.

Demand for new houses peaked at 1.28 million in 2005 during the housing boom, then fell to 306,000 million in 2011, the lowest in records dating back to 1963.

The average cost of a 30-year, fixed-rate mortgage fell to 3.79 percent last week, an all-time low, according to a Freddie Mac survey of lenders.

Gaining Confidence

Builder confidence rose to a five-year high in May, with the National Association of Homebuilders/Well Fargo sentiment gauge rising to 29. The measure had been as low as 14 in September. A measure of sales expectations for the next six months rose to 34 from a revised 31, and the gauge of buyer traffic increased to 23, the highest since April 2007, homebuilders reported earlier this month.

The stabilization in housing has boosted builder shares this year. The Standard & Poor’s Supercomposite Homebuilder Index has surged 33 percent this year compared with a 4.7 percent gain for the broader S&P 500.

Slow income growth could cause consumer spending to level off, said Robert Niblock, chief executive officer of Lowe’s Cos. (LOW), the home-improvement retailer based in Mooresville, North Carolina. The company cut its outlook for the year after slowing first-quarter sales.

“While there has been some acceleration in consumer spending recently, it was aided by unseasonably warm weather,” Niblock said in a May 21 earnings call. “And while there has been improvement in housing turnover, the increase was off a small base. While spending has been strong up to this point in the year, it will likely level off without real income growth. Likewise, it remains to be seen whether housing has really begun to turn.”

                      Bloomberg Survey
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                          New Home New Home     FHFA     FHFA
                             Sales    Sales      HPI      HPI
                            ,000’s     MOM%     MOM%     QOQ%
================================================================
Date of Release              05/23    05/23    05/23    05/23
Observation Period           April    April    March       1Q
----------------------------------------------------------------
Median                         335     2.1%     0.3%     0.1%
Average                        338     3.0%     0.3%    -0.1%
High Forecast                  375    14.3%     0.7%     0.2%
Low Forecast                   325    -0.9%    -0.2%    -0.8%
Number of Participants          72       72       18        5
Previous                       328    -7.1%     0.3%    -0.1%
----------------------------------------------------------------
4CAST                          340     3.7%     ---      ---
ABN Amro                       335     2.0%     0.2%     ---
Action Economics               330     0.6%    -0.2%    -0.8%
Ameriprise Financial           335     2.1%     ---      ---
Analytical Synthesis           341     4.0%     0.6%     ---
Banca Aletti                   335     2.1%     ---      ---
Bantleon Bank AG               340     3.7%     ---      ---
Barclays                       338     3.1%     0.3%     ---
BBVA                           330     0.6%     ---      ---
BMO Capital Markets            344     4.9%    -0.1%     ---
BNP Paribas                    325    -0.9%     ---      ---
BofA Merrill Lynch             345     5.2%     ---      ---
Briefing.com                   340     3.7%     ---      ---
Capital Economics              345     5.2%     0.5%     0.2%
CIBC World Markets             335     2.1%     ---      ---
Citi                           335     2.1%     ---      ---
ClearView Economics            335     2.1%     ---      ---
Comerica                       335     2.1%     ---      ---
Commerzbank AG                 335     2.1%     ---      ---
Credit Agricole CIB            340     3.7%     ---      ---
Credit Suisse                  335     2.1%     ---      ---
Daiwa Securities America       340     3.7%     ---      ---
DekaBank                       340     3.7%     ---      ---
Desjardins Group               340     3.7%     ---      ---
Deutsche Bank Securities       340     3.7%     0.3%     ---
Exane                          345     5.2%     ---      ---
Fact & Opinion Economics       340     3.7%     ---      ---
First Trust Advisors           340     3.7%     ---      ---
FTN Financial                  330     0.6%     ---      ---
Goldman, Sachs & Co.           331     1.0%     ---      ---
High Frequency Economics       375    14.3%     ---      ---
HSBC Markets                   335     2.1%     0.5%     0.0%
Hugh Johnson Advisors          330     0.6%     ---      ---
IDEAglobal                     340     3.7%     ---      ---
IHS Global Insight             335     2.1%     ---      ---
Informa Global Markets         335     2.1%     ---      ---
ING Financial Markets          340     3.7%     0.2%     0.1%
Insight Economics              330     0.6%     ---      ---
Intesa Sanpaulo                325    -0.9%     ---      ---
J.P. Morgan Chase              330     0.6%     0.2%     0.1%
Janney Montgomery Scott        350     6.7%     ---      ---
Jefferies & Co.                335     2.1%     ---      ---
Landesbank Berlin              340     3.7%     ---      ---
Landesbank BW                  345     5.2%     ---      ---
Market Securities              356     8.5%     ---      ---
MET Capital Advisors           340     3.7%     ---      ---
Mizuho Securities              333     1.5%     0.3%     ---
Moody’s Analytics              331     0.9%     ---      ---
Morgan Stanley & Co.           325    -0.9%     ---      ---
National Bank Financial        340     3.7%     ---      ---
Natixis                        331     0.9%     ---      ---
Nomura Securities              331     0.9%     ---      ---
OSK Group/DMG                  325    -0.9%     ---      ---
O’Sullivan                     345     5.2%     0.5%     ---
Parthenon Group                339     3.4%     0.1%     ---
Pierpont Securities            350     6.7%     ---      ---
PNC Bank                       335     2.1%     ---      ---
Raymond James                  335     2.1%     ---      ---
RBC Capital Markets            330     0.6%     ---      ---
RBS Securities                 340     3.7%     ---      ---
Scotiabank                     345     5.2%     ---      ---
SMBC Nikko Securities          335     2.1%     ---      ---
Societe Generale               355     8.2%     ---      ---
Standard Chartered             335     2.1%     ---      ---
Stone & McCarthy Research      340     3.7%     ---      ---
TD Securities                  331     0.9%     0.3%     ---
UBS                            345     5.2%     0.5%     ---
University of Maryland         335     2.1%     ---      ---
Wells Fargo & Co.              341     4.0%     ---      ---
WestLB AG                      340     3.7%     0.2%     ---
Westpac Banking Co.            335     2.0%     0.2%     ---
Wrightson ICAP                 330     0.6%     0.7%     ---
================================================================

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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