Home Prices in U.S. Probably Rose, Consumer Confidence Declined

Home prices rose as sales got a boost from a tax credit, while consumer confidence cooled from a two-year high, signaling a pickup in employment is needed to sustain the recovery, economists said before reports today.

The S&P/Case-Shiller index of April property values in 20 cities climbed 3.4 percent from the same month in 2009, according to the median forecast of 26 economists surveyed by Bloomberg News. The Conference Board’s sentiment gauge fell to 62.5 in June from 63.3 the prior month, the survey showed.

The end of a government homebuyer incentive worth as much as $8,000, mounting foreclosures and unemployment near a 26-year high threaten to set real estate prices back following the stabilization that began earlier this year. Eroding home equity may limit household spending, the biggest part of the economy, even as gains in income help revive demand.

“The worst is behind us but the potential for further price declines still exists,” said David Semmens, an economist at Standard Chartered Bank in New York. “With the expiration of the tax credit, demand has collapsed. Why would consumers commit to buying a house when they’re feeling nervous about job prospects?”

The home-price figures are due at 9 a.m. New York time. Estimates ranged from increases of 1.3 percent to 4.1 percent, after a 2.3 percent year-over-year gain in March.

The Conference Board, a New York-based research group, will issue the sentiment report at 10 a.m. Estimates ranged from 59.5 to 65. May’s reading was the highest since March 2008. The measure averaged 45 in 2009 and 97 during the expansion that ended in December 2007.

Conflicting Reports

The projected drop contrasts with a report last week that showed the Thomson Reuters/University of Michigan final index of consumer sentiment increased in June to the highest level since January 2008.

Consumers spent less in the first quarter than previously estimated, and the world’s largest economy expanded at a slower pace, revised government data showed last week. Improvement in the job and housing market will be needed to lift confidence and in turn, spending, which accounts for about 70 percent of the economy.

The home price gauge fell 0.1 percent in April compared with the prior month, according to the Bloomberg survey.

The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Builder Sales

Builders from KB Home to Lennar Corp. and Toll Brothers Inc. are reporting falling sales after the extended tax credit for homebuyers expired. To qualify, buyers had to sign contracts by April 30 and must close transactions by June 30.

Los Angeles-based KB Home, which targets first-time buyers, reported a wider-than-estimated loss for the quarter ended May 31 as new orders declined 23 percent and the average price for its houses fell 4 percent from a year ago.

“Homebuyers who missed the deadline seemed to step out of the market completely,” KB Home Chief Executive Officer Jeffrey Mezger said in a June 25 conference call with analysts. It’s too early in the third quarter to forecast demand, he said.

“It’s a matter of when, not if, things are going to improve,” Mezger said.

The S&P Supercomposite Homebuilder Index, which includes Toll and Lennar, has dropped 28 percent since reaching a 19- month high on May 3. The broader S&P 500 Index is down 12 percent from April 23’s 19-month peak.

Little Consensus

There is little consensus on the outlook for property values. About half of 106 U.S. forecasters in a study published June 23 by MacroMarkets LLC expect price declines in 2010 and half anticipate either little-change or increasing values.

Purchases of new homes plunged by a record in May from the prior month, and the median price declined from a year earlier to the lowest level since December 2003, Commerce Department data showed. The National Association of Realtors reported a drop in May sales of existing houses.

Foreclosures may be an obstacle for the market for much of the year. More than a fifth of U.S. mortgage holders owed more than their homes were worth in the first quarter, Seattle-based Zillow.com said last month.

                        Bloomberg Survey

================================================================
                         Case Shil Case Shil Case Shil Consumer
                           Monthly  Monthly  Monthly     Conf
                              MOM%     YOY%    Index    Index
================================================================

Date of Release              06/29    06/29    06/29    06/29
Observation Period           April    April    April     June
----------------------------------------------------------------
Median                       -0.1%     3.4%    144.3     62.5
Average                      -0.2%     3.3%    143.9     62.4
High Forecast                 0.2%     4.1%    144.3     65.0
Low Forecast                 -0.9%     1.3%    143.1     59.5
Number of Participants          16       26        3       71
Previous                     -0.1%     2.3%    143.4     63.3
----------------------------------------------------------------
4CAST Ltd.                    ---      3.5%     ---      61.5
Action Economics              ---      ---     143.1     63.0
Aletti Gestielle SGR          ---      ---      ---      62.5
Ameriprise Financial Inc      ---      ---      ---      63.0
Banesto                       ---      3.4%     ---      62.7
Bank of Tokyo- Mitsubishi     ---      ---      ---      61.5
Bantleon Bank AG              ---      ---      ---      63.0
Barclays Capital             -0.1%     3.6%     ---      62.5
Bayerische Landesbank         ---      ---      ---      62.0
BBVA                          ---      ---      ---      61.5
BMO Capital Markets           ---      3.0%     ---      62.0
BNP Paribas                   ---      ---      ---      63.0
BofA Merrill Lynch Research   ---      2.7%     ---      62.5
Briefing.com                  ---      3.0%     ---      63.5
C I T I C Securities          ---      3.0%     ---      ---
Capital Economics             0.2%     3.8%     ---      65.0
Citi                          ---      ---      ---      65.0
ClearView Economics           0.0%     ---      ---      ---
Commerzbank AG                ---      3.3%     ---      63.0
Credit Agricole CIB           ---      ---      ---      63.0
Credit Suisse                 ---      ---      ---      65.0
Daiwa Securities America      ---      ---      ---      64.0
DekaBank                      ---      ---      ---      62.0
Desjardins Group              ---      3.6%     ---      63.5
Deutsche Bank Securities      ---      ---      ---      60.0
Deutsche Postbank AG          ---      ---      ---      63.0
DZ Bank                       ---      ---      ---      63.0
Exane                         ---      ---      ---      60.0
First Trust Advisors          ---      ---      ---      64.1
Fortis                        0.0%     ---      ---      63.0
Goldman, Sachs & Co.          ---      ---      ---      61.0
Helaba                        ---      ---      ---      64.0
High Frequency Economics      ---      1.3%     ---      62.0
HSBC Markets                 -0.5%     3.1%     ---      60.0
IDEAglobal                    ---      3.5%     ---      63.0
IHS Global Insight            ---      ---      ---      62.0
Informa Global Markets        ---      ---      ---      62.0
ING Financial Markets         0.0%     3.6%    144.3     62.0
Insight Economics             ---      3.6%     ---      64.0
Intesa-SanPaulo               ---      ---      ---      61.5
J.P. Morgan Chase            -0.1%     2.4%     ---      62.5
Janney Montgomery Scott      -0.9%     ---      ---      60.0
Jefferies & Co.               ---      ---      ---      60.0
Landesbank Berlin             ---      ---      ---      60.0
Landesbank BW                 ---      ---      ---      61.0
MF Global                    -0.1%     3.5%     ---      59.5
MFC Global Investment         ---      ---      ---      62.0
Moody’s Economy.com           ---      ---      ---      64.0
Morgan Stanley & Co.          ---      ---      ---      63.0
National Bank Financial       ---      ---      ---      63.0
Natixis                       ---      3.4%     ---      62.0
Nomura Securities Intl.       ---      3.0%     ---      ---
Nord/LB                       ---      ---      ---      63.5
Pierpont Securities LLC       ---      ---      ---      64.0
PineBridge Investments        0.0%     ---      ---      61.0
Raiffeisen Zentralbank        ---      ---      ---      62.0
Raymond James                 ---      ---      ---      63.5
RBC Capital Markets           ---      ---      ---      63.0
RBS Securities Inc.           ---      ---      ---      60.0
Ried, Thunberg & Co.         -0.4%     3.2%     ---      64.0
Societe Generale              ---      ---      ---      63.3
Standard Chartered           -0.3%     2.6%     ---      62.0
State Street Global Markets   ---      3.6%    144.3     62.3
Stone & McCarthy Research     ---      ---      ---      61.0
Thomson Reuters/IFR           ---      ---      ---      64.0
Tullett Prebon                ---      ---      ---      60.0
UBS                          -0.4%     ---      ---      63.5
UniCredit Research            ---      4.1%     ---      61.0
Union Investment              ---      ---      ---      63.5
University of Maryland       -0.2%     3.4%     ---      62.5
Wells Fargo & Co.             ---      ---      ---      63.0
WestLB AG                     0.1%     3.7%     ---      61.5
Woodley Park Research         ---      3.6%     ---      59.5
Wrightson Associates         -0.4%     ---      ---      64.0
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net