Economists Predict Decline of Home Sales in June
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WASHINGTON — Home sales in America probably declined in June as the housing slump headed for a third year, undermining the economy and prompting businesses and consumers to trim spending, economists said before reports this week.
Combined sales of new and existing homes dropped 1.3% last month, according to the median estimate of economists surveyed by Bloomberg News. Orders for durable goods, products meant to last several years, probably fell 0.3%.
The biggest housing recession in a generation, now being exacerbated by a tightening in credit as financial losses spread, threatens to stall economic growth. The surge in raw-material costs and slowing demand will likely prompt companies to keep reducing investment in a bid to protect profits.
“Stress in financial markets and curtailment in lending are going to make it more difficult to buy homes,” the chief economist at Nomura Securities International Inc. in New York, David Resler, said. “Manufacturers that produce for homebuilders or homeowners are being hurt by the slump in housing.”
The National Association of Realtors’s report on sales of existing homes is due July 24. Purchases declined to a 4.93 million annual pace from 4.99 million in May, according to the survey median. Sales reached a 4.89 million pace in April, the fewest since comparable records began in 1999.
A day later, the Commerce Department is forecast to report that sales of new houses dropped to an annual pace of 503,000 from 512,000 in May, according to survey estimates. Sales of existing and new homes are down 35% from their July 2005 peak.
Reacting to the weak sales, builders in June began work on the fewest single-family homes since 1991, the Commerce Department reported last week. That signals that home construction will continue to weigh on the economy after subtracting from growth since the first quarter of 2006.
More Americans are walking away from their homes as property values tumble and borrowing costs on adjustable-rate mortgages reset higher. Bank seizures increased a record 171% from a year ago and foreclosure filings rose 53% in June, RealtyTrac Inc., a seller of default data, said July 10.