Home sales probably dropped in May to the lowest level of the year, while orders placed with factories climbed, showing housing remains a soft spot as other parts of the US economy recover, economists said before reports this week.
Purchases of new and existing houses decreased 4.8 per cent to a 5.11 million annual rate last month, the weakest since November, according to the median forecast of economists surveyed by Bloomberg News. Another report may show bookings for goods made to last at least three years increased after falling in April by the most in six months.
A jobless rate hovering around 9 per cent means it will take years to absorb the 1.8 million distressed properties on the market that are weighing down home values, one reason why Federal Reserve policy makers are likely to maintain record stimulus when they meet this week. Manufacturers, on the other hand, may soon recover from the supply disruptions following the disaster in Japan and help underpin the world’s largest economy.
“The outlook for the housing data remains very weak, and there’s been very little evidence of any turnaround,” said David Semmens, a US economist at Standard Chartered Bank in New York. “We’ve obviously seen some slowdown in manufacturing due to the supply-chain issues in Japan. That will work itself out through the second half.”
Sales of existing homes, due from the National Association of Realtors on June 21, fell 5 per cent to a 4.8 million annual pace, according to the median forecast of 55 economists surveyed by Bloomberg.
DEPRESSED DEMAND
After peaking at 7.08 million in 2005, the number of existing homes purchased in 2010 plunged to 4.91 million, a 13-year low. Nonetheless, they now comprise about 94 per cent of the housing market, up from about 85 per cent six years ago, as foreclosures and distressed sales lure some buyers.
The 1.8 million of inventory of distressed homes nationwide would take about three years to sell at the current pace, Daren Blomquist, communications manager at RealtyTrac Inc, said last week.
Competition from existing homes selling at discounted prices is hurting builders. Sales of new properties dropped 4 per cent in May to a 310,000 annual pace.