WASHINGTON (Reuters) - U.S. new home sales fell in May while consumer confidence hit a 10-month low in June on worries about jobs and the business climate.
"These are numbers that are consistent with a slowing down in activity, a moderation on the consumption side," said Steven Wieting, an economist with Citigroup Global Markets in New York.
Sales of new U.S. homes fell 1.6 percent last month to an annual rate of 915,000 units from a downwardly revised pace of 930,000 in April, the Commerce Department said on Tuesday. Analysts had been looking for May new home sales of 925,000.
While sales fell, prices rose. The median sales price of a new home climbed 1.5 percent in May to $236,100 from $232,700 in April. That marked a reversal from April, when prices took a big tumble but sales rose strongly.
However, adding to the gloomy picture for housing, a separate report released on Tuesday showed existing U.S. single-family home prices declined in April, extending a string of negative year-on-year decreases that started in January.
As woes deepened for the housing sector, the second-largest U.S. home builder, Lennar Corp. (NYSE:LEN - news), posted a quarterly loss, forecast a loss for the current quarter, and warned the housing market could tumble further.
The drag the struggling housing market has created for the broader economy looks set to persist, analysts said.
"Housing's contribution to (economic) growth will be negative in both the second quarter and the third quarter," said Steven Wood, chief economist at Insight Economics in Danville, California.
U.S. stocks slipped for a third straight day as investors worried about potential fallout from the ailing subprime mortgage market. The blue chip Dow Jones industrial average closed down 14.39 points at 13,337.66.
Prices for U.S. government bonds were little changed, while the dollar fell against the Japanese yen.
CONFIDENCE SLIPS
While the U.S. economy appears to have gained strength after expanding at an anemic 0.6 percent pace in the first quarter, concerns remain the stalwart American consumer may stumble under the weight of high gasoline prices and hard-to-afford mortgages.
The Conference Board said its index of consumer sentiment fell to 103.9 in June, the weakest since August 2006, from an upwardly revised 108.5 in May. Economists polled by Reuters had been looking for a reading of 105.5.
"A perceived softening in present-day business and employment conditions are the major reasons behind this month's pull-back in confidence," said Lynn Franco, director of the Conference Board's Consumer Research Center.
The business research group's present situation index fell to 127.9 in June -- its lowest level since November 2006 -- from 136.1 in May. The expectations index slipped to 87.9 from 90.1 a month ago.
"Even though gasoline prices have fallen back from their peak, it seems that they have taken their toll on the consumer," said Nigel Gault, chief U.S. economist at Global Insight in Lexington, Massachusetts.
"In addition, the labor market component of the Conference Board survey hints at softening in the job market," he said.
While economists say shifts in consumer confidence do not always portend changes in spending, two reports on Tuesday showed chain store sales growth softened last week.
Redbook Research said chain store sales rose only 1.4 percent last week from a year earlier, slowing from 2 percent a week earlier, while the International Council of Shopping Centers and UBS Securities said sales rose 1.7 percent from a year ago, off from 1.9 percent in the prior week.
Wednesday, June 27, 2007
Tuesday, June 26, 2007
U.S. economy to expand in coming months
NEW YORK — The U.S. economy should expand modestly in coming months as a healthy job market continues to trump weakness in housing prices, a gauge of future business activity showed on Thursday.
The Conference Board said its index of leading economic indicators rose a higher-than-expected 0.3 percent in May, boosted by rising stock prices, higher consumer expectations and the availability of jobs.
Economists said that jobs should continue to be plentiful, despite an unexpected surge in jobless claims last week.
The Labor Department reported Thursday that unemployment claims totaled 324,000 last week, up 10,000 from the previous week, to the highest level since mid-April.
While the big increase was unexpected, analysts said it did not change their view that the labor market remains hardy. Even with the increase, analysts noted claims remain close to their average — 319,000 — over the first 5 1/2 months of the year.
While the overall U.S. economy grew at a lackluster 0.6 percent in the first three months of this year, many analysts believe the pace has picked up significantly in the spring.
The Conference Board's upbeat report shows that the impact of the housing slump has been fairly contained so far, said Patrick Newport, an economist with Global Insight.
"It just hasn't spilled over to the rest of the economy," he said. It also indicates the economy is doing better than last month's leading indicators report suggested, Newport said.
May's increase reversed a revised 0.3 percent drop in April, down from the original 0.5 percent decline that economists blamed on soaring gas prices and a drop in building permits.
The report, designed to forecast economic activity over the next three to six months, tracks 10 economic indicators.
The advancing contributors in May, starting with the largest, were weekly unemployment insurance claims, stock prices, building permits, consumer expectations and vendor performance.
The negative contributors, beginning with the largest, were real money supply, average weekly manufacturing hours and interest rate spread.
With the latest report, the cumulative change in the index over the past six months has gone up 0.3 percent.
Wall Street is fairly confident that falling home prices and rising mortgage defaults won't damage the broader economy. Treasury Secretary Henry Paulson said Wednesday the housing slump is nearing an end and that the losses so far have been contained.
But if mortgage rates keep rising, fewer people will want to buy homes and fewer homeowners will be able to refinance. If that happens, the residential real estate market's troubles could snowball and dampen consumer spending.
The Federal Reserve's Open Market Committee, which sets short-term interest rates, meets next week and is widely expected to leave rates unchanged as they have been for about a year.
A pickup in the economy has raised worries about rising inflation, however.
Stocks rose on Thursday, after the Philadelphia Federal Reserve's report on manufacturing activity in its region jumped a stronger-than-expected 18 in June, up from 4.2 in May.
According to preliminary calculations, the Dow Jones industrial average rose 0.42 percent to 13,545.84 after dropping 146 points Wednesday.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 0.62 percent to 1,522.19 and the Nasdaq composite index advanced 0.65 percent to 2,616.96.
On Tuesday, the Commerce Department said construction of new homes fell in May as the nation's homebuilders were battered by the crisis in subprime lending and rising mortgage rates. Industry sentiment about the housing market fell in June to the lowest point in more than 16 years.
Secondary effects from the housing downturn like layoffs and restrained consumer spending could also start surfacing, said Aaron Smith, an economist with Moody's Economy.com. But the overall drag on the economy from the housing industry should decline in coming months, he said.
"Building permits cannot continue declining at the pace they have," Smith said.
The Conference Board said its index of leading economic indicators rose a higher-than-expected 0.3 percent in May, boosted by rising stock prices, higher consumer expectations and the availability of jobs.
Economists said that jobs should continue to be plentiful, despite an unexpected surge in jobless claims last week.
The Labor Department reported Thursday that unemployment claims totaled 324,000 last week, up 10,000 from the previous week, to the highest level since mid-April.
While the big increase was unexpected, analysts said it did not change their view that the labor market remains hardy. Even with the increase, analysts noted claims remain close to their average — 319,000 — over the first 5 1/2 months of the year.
While the overall U.S. economy grew at a lackluster 0.6 percent in the first three months of this year, many analysts believe the pace has picked up significantly in the spring.
The Conference Board's upbeat report shows that the impact of the housing slump has been fairly contained so far, said Patrick Newport, an economist with Global Insight.
"It just hasn't spilled over to the rest of the economy," he said. It also indicates the economy is doing better than last month's leading indicators report suggested, Newport said.
May's increase reversed a revised 0.3 percent drop in April, down from the original 0.5 percent decline that economists blamed on soaring gas prices and a drop in building permits.
The report, designed to forecast economic activity over the next three to six months, tracks 10 economic indicators.
The advancing contributors in May, starting with the largest, were weekly unemployment insurance claims, stock prices, building permits, consumer expectations and vendor performance.
The negative contributors, beginning with the largest, were real money supply, average weekly manufacturing hours and interest rate spread.
With the latest report, the cumulative change in the index over the past six months has gone up 0.3 percent.
Wall Street is fairly confident that falling home prices and rising mortgage defaults won't damage the broader economy. Treasury Secretary Henry Paulson said Wednesday the housing slump is nearing an end and that the losses so far have been contained.
But if mortgage rates keep rising, fewer people will want to buy homes and fewer homeowners will be able to refinance. If that happens, the residential real estate market's troubles could snowball and dampen consumer spending.
The Federal Reserve's Open Market Committee, which sets short-term interest rates, meets next week and is widely expected to leave rates unchanged as they have been for about a year.
A pickup in the economy has raised worries about rising inflation, however.
Stocks rose on Thursday, after the Philadelphia Federal Reserve's report on manufacturing activity in its region jumped a stronger-than-expected 18 in June, up from 4.2 in May.
According to preliminary calculations, the Dow Jones industrial average rose 0.42 percent to 13,545.84 after dropping 146 points Wednesday.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 0.62 percent to 1,522.19 and the Nasdaq composite index advanced 0.65 percent to 2,616.96.
On Tuesday, the Commerce Department said construction of new homes fell in May as the nation's homebuilders were battered by the crisis in subprime lending and rising mortgage rates. Industry sentiment about the housing market fell in June to the lowest point in more than 16 years.
Secondary effects from the housing downturn like layoffs and restrained consumer spending could also start surfacing, said Aaron Smith, an economist with Moody's Economy.com. But the overall drag on the economy from the housing industry should decline in coming months, he said.
"Building permits cannot continue declining at the pace they have," Smith said.
Friday, June 22, 2007
Rates on 30-year mortgages down
WASHINGTON - Rates on 30-year mortgages, after rising for five straight weeks, edged down slightly this week as investors digested news that suggested the economic drag from housing could last longer than expected.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.69 percent this week. That was down from 6.74 percent last week, when rates had jumped to the highest level in 11 months.
Analysts said the slight retreat occurred because financial markets saw two weak reports on housing as indications that troubles in the slumping sector are continuing to mount.
The government reported that construction of new homes and apartments fell by 2.1 percent in May, leaving building activity 24.2 percent below the level of a year ago, while the National Association of Home Builders said its index of builder sentiment in June fell to a 16-year low.
Builders have been slashing prices and offering other incentives to move a glut of unsold homes. Demand has been hurt by mounting troubles in the market for subprime mortgages, loans offered to borrowers with weak credit histories.
"Mortgage rates eased this week due to market concerns that the housing market will be a longer drag on the economy," said Frank Nothaft, Freddie Mac's chief economist.
The overall economy slowed to an anemic 0.6 percent growth rate in the first three months of this year, the weakest performance in more than four years, with housing one of the key factors depressing activity.
All mortgage rates tracked by Freddie Mac showed declines this week.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 6.37 percent, down from 6.43 percent last week.
Five-year adjustable-rate mortgages averaged 6.31 percent, down from 6.37 percent while one-year adjustable mortgages fell to 5.66 percent, down from 5.75 percent last week.
The mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages each carried a nationwide average fee of 0.5 point. Five-year adjustable mortgages carried a fee of 0.6 point while one-year ARMs had a fee of 0.7 point.
A year ago, rates on 30-year mortgages stood at 6.71 percent, 15-year mortgages were at 6.36 percent, five-year adjustable-rate mortgages averaged 6.32 percent and one-year ARMs were at 5.75 percent.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.69 percent this week. That was down from 6.74 percent last week, when rates had jumped to the highest level in 11 months.
Analysts said the slight retreat occurred because financial markets saw two weak reports on housing as indications that troubles in the slumping sector are continuing to mount.
The government reported that construction of new homes and apartments fell by 2.1 percent in May, leaving building activity 24.2 percent below the level of a year ago, while the National Association of Home Builders said its index of builder sentiment in June fell to a 16-year low.
Builders have been slashing prices and offering other incentives to move a glut of unsold homes. Demand has been hurt by mounting troubles in the market for subprime mortgages, loans offered to borrowers with weak credit histories.
"Mortgage rates eased this week due to market concerns that the housing market will be a longer drag on the economy," said Frank Nothaft, Freddie Mac's chief economist.
The overall economy slowed to an anemic 0.6 percent growth rate in the first three months of this year, the weakest performance in more than four years, with housing one of the key factors depressing activity.
All mortgage rates tracked by Freddie Mac showed declines this week.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 6.37 percent, down from 6.43 percent last week.
Five-year adjustable-rate mortgages averaged 6.31 percent, down from 6.37 percent while one-year adjustable mortgages fell to 5.66 percent, down from 5.75 percent last week.
The mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages each carried a nationwide average fee of 0.5 point. Five-year adjustable mortgages carried a fee of 0.6 point while one-year ARMs had a fee of 0.7 point.
A year ago, rates on 30-year mortgages stood at 6.71 percent, 15-year mortgages were at 6.36 percent, five-year adjustable-rate mortgages averaged 6.32 percent and one-year ARMs were at 5.75 percent.
Tuesday, June 05, 2007
Slower Market Dampens "Ugly" Home Business
HomeVestors of America, the company known for its “We Buy Ugly Houses” signs, is having a tough time as the market slows down — particularly in Florida, which used to be one of its best markets.
Some of the factors making its business more challenging: The sharp run-up in home prices in recent years, the lack of equity that owners have in many of the properties now for sale, and slack demand among homebuyers.
“This is temporary,” says John Hayes, chief executive officer of Dallas-based HomeVestors. "We're just riding through this transition with Florida."
The median resale price of an Orlando-area home was appreciating as much as 36 percent annually by mid-2005, before settling back to single digits by mid-2006 and turning negative in April for the first time in five years.
Some of the factors making its business more challenging: The sharp run-up in home prices in recent years, the lack of equity that owners have in many of the properties now for sale, and slack demand among homebuyers.
“This is temporary,” says John Hayes, chief executive officer of Dallas-based HomeVestors. "We're just riding through this transition with Florida."
The median resale price of an Orlando-area home was appreciating as much as 36 percent annually by mid-2005, before settling back to single digits by mid-2006 and turning negative in April for the first time in five years.
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