Home sales probably fell in January, while orders for long-lasting goods climbed, a reminder that housing lags behind manufacturing as the U.S. recovery strengthens, economists said before reports this week.
Combined purchases of new and existing homes fell 2 percent to a 5.5 million annual pace, according to the median forecast of economists surveyed by Bloomberg News. Durable-goods bookings increased 3 percent last month, the survey showed.
Unemployment hovering near 9 percent means foreclosures may keep rising, adding to a glut of inventory that is depressing property values, hurting builders and homeowners. Growing exports, combined with increasing profits and tax incentives signed into law by President Barack Obama in December, will probably keep orders flowing to companies like Caterpillar Inc.
“Housing is basically flat on its back, and manufacturing is growing very fast, probably the biggest contrast in the economy,” said Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts. Home prices are still on the way down.”
Sales of existing homes fell 1.5 percent to a 5.2 million annual pace, economists surveyed by Bloomberg forecast the National Association of Realtors will report Feb. 23. Commerce Department figures the following day may show demand for new homes dropped 8.8 percent to a 300,000 rate, the survey showed. Purchases reached a record low 274,000 pace in August.
More Orders
Orders for durable goods rose in January after a 2.3 percent decline the prior month, economists forecast the Commerce Department will report Feb. 24. Excluding demand for transportation, which is often volatile, bookings may have climbed for a third month.
The business spending that helped lead the economy out of recession may gain a second wind from a new tax provision that was part of Obama’s compromise with congressional Republicans. Companies will be able to depreciate 100 percent of investments in capital equipment this year.
Demand from abroad is also growing. Exports in December rose to the highest level since July 2008.
Caterpillar, the world’s largest maker of construction equipment, is projecting 2011 sales will top $50 billion after coming in at $42.6 billion last year.
“Sales are improving in every region, and are at or near records in the developing world,” Mike DeWalt, director of investor relations at Caterpillar, said on a Jan. 27 teleconference. “Over the past quarter, we’ve become somewhat more positive about economic growth in the developed economies of North America, Europe, and Japan.”
Fed Views
Federal Reserve policy makers noted the dichotomy in their Jan. 26 policy statement.
“Business spending on equipment and software is rising,” they said. At the same time, they said housing remained “depressed” and falling home values continued to stymie the consumer spending that accounts for about 70 percent of the world’s largest economy.
Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder index of 12 builders has gained 24 percent since June 30, compared with a 30 percent increase for the S&P 500 Index. The S&P Machinery Supercomposite Index is up 58% during that time.
The S&P/Case-Shiller index of home values in 20 cities fell 2.4 percent in December from the same month in 2009, the biggest 12-month decrease in a year, economists surveyed forecast the group will say Feb. 22.
Industry projections reinforce the concern about housing. The number of homes receiving a foreclosure notice will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac Inc., an Irvine, California-based data seller, said last month.
Underwater Mortgages
At the end of last year about 15.7 million mortgaged single-family homes, or 27 percent, were worth less than the amount of loans outstanding, according to Zillow Inc., a Seattle-based real-estate information company. It was the highest share in data going back to the first quarter of 2009.
Higher borrowing costs may further hurt sales. The average rate on 30-year fixed mortgages exceeded 5 percent for a second week in the period ended Feb. 11, the first time that’s happened since April, the Mortgage Bankers Association said last week. Rates have climbed from a record low of 4.21 percent in October.
While consumer confidence has been climbing, it remains below pre-recession levels. The Conference Board’s sentiment index decreased to 65 this month from a revised 65.6 in January that was the highest since March 2008, economists forecast the New York-based private research group will report on Feb. 22.
The Reuters/University of Michigan final confidence index for February may rise to 75.4 from a preliminary reading of 75.1, and 74.2 at the end of January, economists forecast the group will report on Feb. 25.
Lastly this week, the second report on gross domestic product for the fourth quarter, due Feb. 25, may show the economy grew at a 3.3 percent rate, faster than the 3.2 percent originally estimated, according to the survey median.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Case Shiller Monthly MO 2/22 Dec. -0.5% -0.5%
Case Shiller Monthly YO 2/22 Dec. -1.6% -2.4%
Case Shiller Monthly In 2/22 Dec. 143.9 143.3
Case Shiller Quarterly 2/22 4Q -1.5% -3.5%
Case Shiller Quarterly 2/22 4Q 135.5 132.6
Consumer Conf Index 2/22 Feb. 65.6 65.0
Exist Homes Mlns 2/23 Jan. 5.28 5.20
Exist Homes MOM% 2/23 Jan. 12.3% -1.5%
Durables Orders MOM% 2/24 Jan. -2.3% 3.0%
Durables Ex-Trans MOM% 2/24 Jan. 0.8% 0.5%
Cap Goods Core MOM% 2/24 Jan. 1.9% -1.0%
Initial Claims ,000’s 2/24 19-Feb 410 405
Cont. Claims ,000’s 2/24 12-Feb 3911 3880
BCCI 2/24 Feb. 20 -43 n/a
New Home Sales ,000’s 2/24 Jan. 329 300
New Home Sales MOM% 2/24 Jan. 17.5% -8.8%
GDP Annual QOQ% 2/25 4Q S 3.2% 3.3%
Personal Consump. QOQ% 2/25 4Q S 4.4% 4.2%
GDP Prices QOQ% 2/25 4Q S 0.3% 0.3%
Core PCE Prices QOQ% 2/25 4Q S 0.4% 0.4%
U of Mich Conf. Index 2/25 Feb. F 75.1 75.4
================================================================Source: Bloomberg By
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