The US housing market took another step back last month as construction and purchases dropped, and a gauge of the outlook for growth signaled the expansion will lose steam, economists said before reports this week.
Builders began work on 580,000 houses last month at an annual rate, down 2.2 percent from May and the slowest pace this year, according to the median estimate of 61 economists surveyed by Bloomberg News before Department of Commerce data due tomorrow. Other reports may show sales of existing homes decreased for a second month and the index of leading indicators declined for the first time in more than a year.
The expiration of a buyer tax credit has caused housing to retreat, showing the industry that precipitated the recession cannot sustain a recovery absent job growth. The financial turmoil caused by the European debt crisis has shaken confidence in the world’s largest economy, raising the risk that spending and employment will cool.
“At a minimum, we’re headed for a soft patch and possibly an extended period of slow growth,” said Julia Coronado, a senior economist at BNP Paribas in New York. “There is a lot of uncertainty about where housing goes from here. Now that we’re in the world ex-tax credits, it’s not clear how deep the pool of demand is for housing.”
US Federal Reserve Chairman Ben Bernanke will deliver his semiannual report on the economy to members of Congress on Wednesday. Policymakers last month predicted the expansion would be too slow over the next two years to return to the 5 percent to 5.3 percent jobless rate that they consider full employment, according to minutes of the meeting released last week.
Housing’s inability to maintain a rebound is one reason the economic recovery is not gaining speed. Building permits, a sign of future construction, were little changed at a 575,000 annual pace, economists project the Commerces construction report will also show.
The projected drop in housing starts would follow a 10 percent decrease in May after the deadline to sign purchase agreements, and become eligible to receive a government credit worth as much as US$8,000, lapsed on April 30.
Sales of existing homes fell to a 5.1 million annual rate last month from 5.66 million the prior month, economists forecast before Thursday’s report from the National Association of Realtors. In April, purchases reached a 5.79 million pace, the highest level since the tax credit was originally due to expire in November last year.
Existing sales, which are tallied when a deal closes, may still have been influenced by the government program last month since the closing deadline was June 30 for those meeting the April 30 signing cutoff. The closing deadline was extended this month to Sept. 30 to make sure prospective buyers have enough time to complete transactions.
Homebuilders turned even more pessimistic this month, the National Association of Home Builders/Wells Fargo confidence index today may show, according to economists surveyed. The index fell to 16 from 17 last month. Readings below 50 mean more respondents said conditions were poor.
Builders compete with inventories of existing homes that are expanding because of mounting foreclosures. Home seizures climbed 38 percent in the second quarter from a year earlier, RealtyTrac Inc said last week, putting lenders on pace to claim more than 1 million properties this year.
KB Home, the US homebuilder that targets first-time buyers, reported a wider-than-estimated loss and a drop in new orders in its second quarter.
“A lack of predictability in the overall sales environment will likely impact our full-year deliveries and could potentially extend our outlook for profitability,” KB Home chief executive officer Jeffrey Mezger said in a conference call on June 25.
Home builders have underperformed the broader stock market this year. The Standard & Poor’s Supercomposite Homebuilder Index has fallen about 11 percent so far this year, compared with a 4.5 percent decline for the S&P 500 Index.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to