Bloomberg News

Sales of New Houses in U.S. Probably Climbed to Two-Year High

October 24, 2012

Sales of New U.S. Houses Probably Increased in September

A "Sold" sign stands outside a new home under construction in a housing development in Peoria, Illinois. Photographer: Daniel Acker/Bloomberg

Purchases of new homes in the U.S. probably rose in September to the highest level in more than two years as the industry that helped bring on the last recession forged its way toward recovery, economists said before a report today.

Sales, tabulated when contracts are signed, climbed 3.2 percent to a 385,000 annual pace, the most since buyers took advantage of a government tax credit in April 2010, according to the median estimate in a Bloomberg survey of 75 economists.

Demand for new homes is being driven by record-low mortgage rates and population growth, which will help generate business for builders like Hovnanian Enterprises Inc. (HOV:US) A lack of jobs and strict lending conditions still pose hurdles to a more pronounced rebound.

“Housing is on a gradual upward slope,” said Tom Simons, an economist at Jefferies Group Inc. in New York. “Things are starting to get better. We still face some headwinds. Incomes are not rising substantially, credit is still tight, and there’s the looming specter of foreclosures.”

The Commerce Department will release the sales data at 10 a.m. in Washington. Economists’ forecasts ranged from 370,000 to 410,000 compared with a decline to a 373,000 pace in August.

A jump in housing starts in September was the latest sign the new-home industry is showing signs of vitality. Beginning construction rose last month to an 872,000 annual rate, the fastest pace since July 2008 and exceeding all forecasts in a Bloomberg survey, Commerce Department figures showed Oct. 17.

Existing Homes

The existing homes market is also improving. Figures from the National Association of Realtors last week showed previously owned homes sold at a 4.75 million rate in September and a 4.83 million rate in August, the strongest back-to-back pace since mid-2010.

Sales of new homes are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. Newly constructed houses accounted for 6.7 percent of the residential market in 2011, down from a high of 15 percent during the boom of the past decade.

“It’s no longer a question of whether the industry is rebounding,” Larry Sorsby, chief financial officer of Red Bank, New Jersey-based Hovnanian, the best-performing homebuilding stock this year, told Bloomberg on Oct. 17. “There is clear evidence that we have bounced off the bottom and are in the midst of a recovery.”

Cheap borrowing costs are underpinning that recovery. The average 30-year fixed rate mortgage was 3.37 percent in the week ended Oct. 18, near a record-low of 3.36 reported Oct. 4, according to data from Freddie Mac that dates back to 1971.

More Households

Another boon for housing, the number of households in the U.S. grew 2 percent in 2011, the biggest gain in 10 years, to 119.9 million, according to the most recent Census Bureau data.

Rising demand could further stoke construction, thereby promoting stronger economic growth. There were enough properties on the market in August to last 4.5 months at the current sales pace, matching July as the lowest level in almost seven years, according to Commerce Department data.

The building environment has made construction companies less pessimistic. The National Association of Home Builders/Wells Fargo builder sentiment index increased to 41 this month, the highest since June 2006 and the sixth-straight gain, figures showed yesterday. Still, readings below 50 mean more respondents said conditions were poor.

Shares of homebuilders are reflecting the brighter outlook. The Standard & Poor’s Supercomposite Homebuilding Index (S15HOME), which includes Toll Brothers Inc. and Lennar Corp., has climbed 85 percent this year. The broader S&P 500 has risen 12 percent in that period.

Record Sales

Nonetheless, the projected level of new-home sales for September would still be less than a third the pace of the pre- recession peak, when purchases were running in excess of a 1.2 million annual rate per month.

Federal Reserve policy makers are trying to sustain the progress in the real-estate market. In September, Fed Chairman Ben S. Bernanke called housing “one of the missing pistons in the engine” as he announced the third round of large-scale asset purchases intended to push down long-term interest rates and spur growth.

The Federal Open Market Committee will release a statement on monetary policy at 2:15 p.m. today following the conclusion of their two-day meeting in Washington.

                Bloomberg Survey

===========================================
                          New Home New Home
                             Sales    Sales
                            ,000’s     MOM%
===========================================
Date of Release              10/24    10/24
Observation Period           Sept.    Sept.
-------------------------------------------
Median                         385     3.2%
Average                        387     3.7%
High Forecast                  410     9.9%
Low Forecast                   370    -0.8%
Number of Participants          75       75
Previous                       373    -0.3%
-------------------------------------------
4CAST Ltd.                     395     5.9%
ABN Amro Inc.                  382     2.4%
Action Economics               385     3.2%
Ameriprise Financial Inc       382     2.4%
Bank of the West               387     3.8%
Bantleon Bank AG               390     4.6%
Barclays                       380     1.9%
BBVA                           385     3.2%
BMO Capital Markets            388     4.0%
BNP Paribas                    385     3.2%
BofA Merrill Lynch Resear      390     4.6%
Briefing.com                   385     3.2%
Capital Economics              385     3.2%
CIBC World Markets             391     4.8%
Citi                           385     3.2%
ClearView Economics            385     3.2%
Comerica Inc                   373     0.0%
Commerzbank AG                 380     1.9%
Credit Agricole CIB            390     4.6%
Credit Suisse                  395     5.9%
Daiwa Securities America       375     0.5%
Danske Bank                    390     4.6%
DekaBank                       400     7.2%
Desjardins Group               410     9.9%
Deutsche Bank Securities       370    -0.8%
Exane                          395     5.9%
First Trust Advisors           380     1.9%
FTN Financial                  393     5.4%
Goldman, Sachs & Co.           373     0.0%
Hammer Partners SA             390     4.6%
Helaba                         390     4.6%
High Frequency Economics       400     7.2%
HSBC Markets                   396     6.2%
Hugh Johnson Advisors          371    -0.5%
IDEAglobal                     385     3.2%
IHS Global Insight             395     5.9%
Informa Global Markets         375     0.5%
ING Financial Markets          382     2.4%
Insight Economics              380     1.9%
Intesa Sanpaulo                390     4.6%
J.P. Morgan Chase              380     1.9%
Janney Montgomery Scott L      390     4.6%
Jefferies & Co.                380     1.9%
John Hancock Financial         384     3.0%
Landesbank Berlin              395     5.9%
Landesbank BW                  390     4.6%
Lloyds Bank Wbm                375     0.5%
Market Securities              400     7.2%
MET Capital Advisors           380     1.9%
Mizuho Securities              379     1.5%
Moody’s Analytics              391     4.8%
Morgan Stanley & Co.           395     5.9%
National Bank Financial        385     3.2%
Natixis                        380     1.9%
Nomura Securities Intl.        399     7.0%
OSK Group/DMG                  395     5.9%
Oxford Economics Ltd           380     1.9%
Pierpont Securities LLC        390     4.6%
PineBridge Investments         379     1.5%
PNC Bank                       380     1.9%
Raymond James                  385     3.2%
RBC Capital Markets            375     0.5%
RBS Securities Inc.            390     4.6%
Regions Financial Corp         388     4.0%
Renaissance Macro Researc      380     1.9%
Scotiabank                     385     3.2%
Societe Generale               410     9.9%
Standard Chartered             380     1.9%
Stone & McCarthy Research      380     1.9%
TD Securities                  395     5.9%
UBS                            400     7.2%
University of Maryland         388     4.0%
Wells Fargo & Co.              386     3.5%
Westpac Banking Co.            396     6.0%
Wrightson ICAP                 385     3.2%
===========================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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


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Companies Mentioned

  • HOV
    (Hovnanian Enterprises Inc)
    • $3.71 USD
    • 0.21
    • 5.66%
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