Sales of Existing Homes in the U.S. Probably Increased in May
By Courtney Schlisserman
June 26 (Bloomberg) -- Sales of U.S. previously owned houses probably rose in May from a record low as depressed prices lured some buyers into the market, economists said before a report today.
Resales rose 1.2 percent to a 4.95 million annual rate, according to the median forecast of 72 economists surveyed by Bloomberg News ahead of a report by the National Association of Realtors. April's sales pace of 4.89 million matched the lowest level since records began in 1999.
A drop in property values may have spurred demand in some of the most depressed areas, such as California and the Midwest. Even so, rising mortgage rates, a glut of unsold homes, and stricter borrowing rules indicate the real estate recession will persist for most of the year.
``We're not quite convinced we've reached a bottom yet,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts.
The Realtors group is scheduled to release the report at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from 4.75 million to 5.15 million.
Other reports today may show that firings eased last week and the economy grew in the first quarter at a faster pace than previously estimated.
Initial jobless claims fell to 375,000 last week, from 381,000 a week earlier, according to the Bloomberg survey median. While down, the level of applications still indicates the job market is soft.
Economic Growth
Gross domestic product rose at a 1 percent annual rate for the first three months of the year, compared with the 0.9 percent pace estimated last month, according to the survey median. Following the fourth quarter's 0.6 percent growth rate, the economic expansion for the six months ended in March was the weakest in five years.
Federal Reserve policy makers yesterday left the benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, and said growth risks had diminished while higher energy costs boosted the threat of inflation.
The ``ongoing housing contraction,'' stricter lending rules and the jump in fuel costs were among the factors the central bankers predicted would hurt economic growth for at least the rest of the year.
Declines in residential construction have been a drag on growth since the first quarter of 2006. In addition, demand for furniture and building materials has sagged and home prices and consumer confidence have fallen.
Prices Drop
The S&P/Case-Shiller index earlier this week showed prices in 20 U.S. metropolitan areas fell 15.3 percent in April from a year earlier, the steepest decline since records began in 2001.
Rising rates of defaults and foreclosures may bring more homes onto the market and put even more pressure on prices. Banks repossessed twice as many homes in May as they did a year ago and foreclosure filings rose 48 percent, according to RealtyTrac Inc., a real estate database in Irvine, California.
The California Association of Realtors yesterday said sales in that state rose 18 percent in May from the same month last year as median prices dropped 35 percent.
The increase was due to a high number of ``distressed sales,'' the group said.
Recent reports suggest the housing slump will continue. The Mortgage Bankers Association's index of loan applications to purchase homes fell last week to the lowest level in more than five years.
The Commerce Department said yesterday that sales of new homes fell to a 512,000 pace last month, the second-lowest reading since 1991. At that pace, it would take 10.9 months to sell all the houses currently on the market.
Timelier Gauge
While sales of previously owned homes account for about 85 percent of the market, new home sales are considered to be a timelier indicator because they are based on contract signings. Resales are tabulated once a transaction is closed, which typically occurs a month or two later.
``It feels to us as though we're pretty much on the bottom, but that doesn't make you feel too good,'' Robert Toll, chief executive officer of Toll Brothers Inc., the largest U.S. luxury-home builder, said in a Bloomberg Television interview June 24. ``We have noticed some good times coming back in some markets, but in other markets, there's no sign of recovery.''
On June 3, Horsham, Pennsylvania-based Toll reported a loss for the third straight quarter.
