Existing Home Sales Rise--Affordability Helps

To move the merchandise, cut the price. That time-tested formula finally seems to be working in the U.S. housing market. The National Association of Realtors said today that sales of existing homes rose 3.4 percent in April, from March (seasonally adjusted).

No doubt a big reason was the improvement in affordability. The interest rate on a 30-year fixed-rate mortgage has continued falling since the period covered by the NAR report, portending better times ahead. Freddie Mac (FMCC), the mortgage-buying giant, says the rate was 3.79 percent in the week ended May 17, the lowest since it began keeping records in 1971. The Realtors’s index of affordability hit a record high in the January-March quarter. It factors in sales prices of existing homes, mortgage rates, and household income, which is slowly strengthening as the labor market improves.

The median sales price rose 10.1 percent from a year earlier. That hurts affordability, but it could lure buyers who decide they can’t wait for even cheaper prices. “Today’s data provide further evidence that the housing sector is turning the corner,” wrote economist Joseph Lavorgna of Deutsche Bank Securities.

The numbers could well improve in the months to come. Action Economics Chief Economist Michael Englund wrote: “The existing home sales data generally continue to underperform the recovery in the new home market and other indicators of real estate market activity.” But, he added, “the trend is upward.”

Tomorrow the U.S. Census Bureau will report sales of new homes in April. The median estimate of economists surveyed by Bloomberg is that they rose 2.6 percent from March.

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BofA's Asset Sales Sink Profits

January 19, 2012, 7:25 AM EST By Hugh Son

(Updates shares in the seventh paragraph.)

Jan. 18 (Bloomberg) -- Bank of America Corp.’s $33 billion of asset sales last year, designed to help meet international capital standards, may slice at least $2.8 billion from 2012 profit that the firm also needs to reach its target.

That’s probably more than the bank earned before taxes in all of 2011, a year marred by the worst quarterly loss for the Charlotte, North Carolina-based company. The amount, based on estimates compiled by Bloomberg, reflects the loss of income from divestments including a stake in a Chinese lender, a Canadian credit-card unit and an insurer of foreclosed homes.

“There are consequences to downsizing the balance sheet, and that’s lower interest income,” David Trone, an analyst at JMP Securities LLC, said in an interview. “Management gets into situations where they have to make uneconomic decisions. It reflects how intense the pressure is for them.”

Chief Executive Officer Brian T. Moynihan boosted asset sales at the second-biggest U.S. bank from $20 billion in 2010 to avoid issuing stock that would dilute current shareholders. He may end up doing that anyway: With fewer unwanted assets left to sell, Moynihan is now more reliant on earnings to generate capital. Selling shares or even crucial businesses can’t be ruled out if new mortgage losses wipe out profit.

“The risk of having to initiate core asset sales or a partial breakup of the company is rising with the persistent pressure on core earnings,” said Todd Hagerman, an analyst at Sterne Agee Group Inc. in New York, in a Dec. 21 note.

Selling Pieces

Moynihan, 52, started selling pieces of the bank as costs from shoddy loans inherited in the 2008 acquisition of Countrywide Financial Corp. soared to $40 billion. He faces another $12 billion to $32 billion in such expenses, according to a Jan. 5 note by Keith Horowitz, an analyst at Citigroup Inc. in New York, who rates the lender a “buy.” Trone, with a “market perform” rating, sees as much as $40 billion more.

While the lender probably can manage these charges over time, regulators could force Bank of America to raise capital, said a person with knowledge of the firm’s planning. The bank is more likely to choose a stock sale than sell a core business, particularly if shares rise above $10, said the person, who declined to be identified because the process is private. The stock rose 2.3 percent to $6.63 at 10:09 a.m. in New York.

Quarterly Results

Bank of America reports fourth-quarter results tomorrow. The firm may post pretax profit of $3.68 billion, according to the average of estimates by 13 analysts surveyed by Bloomberg. Full-year totals are likely to be much less because losses in the first nine months were $2.66 billion.

According to analysts’ estimates, Bank of America forfeited $1.5 billion a year in pretax earnings when it sold its non-U.S. credit-card unit. Also gone is the bank’s stake of about 10 percent in China Construction Bank Corp., that nation’s second- largest lender, which paid a $774 million annual dividend; the Balboa insurance unit, which contributed $410 million, and $75 million earned from shares in asset manager BlackRock Inc.

Jerry Dubrowski, a Bank of America spokesman, confirmed Bloomberg’s estimate of the income drop. He declined to say whether the bank would sell core assets or offer new shares to investors if pushed by regulators to raise more capital.

More earnings may have been sacrificed with the sale of private-equity stakes in NPC International Inc., the biggest U.S. Pizza Hut franchisee, and hospital operator HCA Holdings Inc. The company didn’t provide estimates on how much profit those holdings contributed.

‘Growth Company’

Moynihan told investors in March that the bank had returned to being a “growth company” and could earn $35 billion to $40 billion in pretax profit when businesses recover.

Showing how far Bank of America is from full recovery, the company probably made just $2.6 billion in pretax income for 2011, according to Bloomberg estimates, after a record second- quarter loss stemming from mortgage settlements. Analysts expect pretax profit of $16.2 billion in 2012 and $22.6 billion in 2013, about half of Moynihan’s target.

Bank of America needs the money to help reach higher levels of capital demanded by regulators as a cushion against losses from future financial crises. Under new and more stringent rules approved by the Basel Committee on Banking Supervision, the firm may have to retain more than $40 billion in earnings by 2019. The figure could drop if the bank sells more of its riskiest assets, which would cut the need for capital, Dubrowski said.

‘Earnings Power’

“It’s an important question for investors -- what’s their earnings power?” said Jefferson Harralson, an Atlanta-based analyst at KBW Inc. with a “market perform” rating on the lender. “What kinds of returns can shareholders expect?”

Bank of America, which held the title of biggest U.S. bank by assets until last year, is shrinking faster than rivals. It pared assets by $45 billion, to $2.2 trillion, in the first nine months of 2011. Citigroup contracted by $22 billion, to $1.9 trillion, over the same period, selling holdings including student loans.

Moynihan is seeking to make Bank of America a leaner, more focused company amid stagnant revenue and sluggish U.S. economic growth. In the process, he’s dismantling some of the more than $130 billion in acquisitions made by his predecessor, Kenneth D. Lewis, who was criticized by investors for overpaying when he bought Countrywide and Merrill Lynch & Co. as those firms were reeling toward collapse.

‘Hot Coals’

The divestments pushed the bank’s Tier 1 capital above 9 percent by the fourth quarter, more than double the level during the 2008 financial crisis. Tier 1 capital, which includes common stock, reserves and retained earnings, is a measure of a bank’s financial strength and ability to absorb unexpected losses. The lender used proceeds to trim debt, which reduces interest costs, Dubrowski said. Long-term debt declined by $50 billion to $399 billion as of Sept. 30, the bank said in November.

“What Moynihan has been doing must be as fun as walking on hot coals, but he keeps walking,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management LLC, which has $500 million in assets including Bank of America shares. “There’s a grudging, arm’s-length respect for him continuing to fight.”

Moynihan told employees at a town-hall meeting in October that he had largely completed his plan to spin off name-brand holdings. The company will now focus on cutting so-called risk- weighted assets, including mortgage-servicing contracts and credit-card loans, he said.

“We’re getting to the point where the franchise we have is in the condition we want it in,” Moynihan said at the time. “There are still non-core assets we’re getting rid of, but it’s loan portfolios, things of less note, and that will take place through the next 12 to 18 months.”

Reducing Branches

Bank of America could break up a segment of its retail- banking business if regulators required a capital raise, said Thomas Brown, CEO of New York-based Second Curve Capital LLC, in a Dec. 9 Bloomberg Television interview. In June, the bank told the Federal Reserve it could reduce branches to bolster finances in an emergency, said a person briefed on the discussions.

“There’s no question that Bank of America is worth a lot more broken up than it is today,” said Brown, a former Wall Street banking analyst and now a Bloomberg contributing editor.

Meanwhile, JPMorgan Chase & Co. CEO Jamie Dimon, 55, has said his firm, now the biggest U.S. bank by assets, would expand beyond its 5,508 locations to capture more deposits. Bank of America had 5,715 retail centers as of Sept. 30.

Merrill Lynch

Bank of America could also find a buyer for its wealth- management unit, whose 16,722 financial advisers each produce about $890,000 in annual revenue, Mike Mayo, a New York-based analyst at CLSA Ltd., said last week in an interview. Moynihan has said he won’t undo any part of the Merrill Lynch takeover, which gave the firm the opportunity to sell bank products to brokerage clients.

The CEO made other decisions last year that boosted capital while potentially shrinking profit for stockholders.

In August, Moynihan agreed to pay $300 million a year to Warren Buffett’s Berkshire Hathaway Inc. in exchange for a $5 billion investment. That deal includes the option for Berkshire to buy 700 million shares in the lender at $7.14, which could make him the biggest shareholder and dilute other investors.

The bank issued 400 million shares to investors in private exchanges for preferred securities in November and December. While the moves are dilutive, they lower interest payments, which benefits investors, the bank has said. The company has more than 10 billion shares outstanding.

New Shares

The lender may issue another $15 billion in stock this year to meet capital requirements, Matthew O’Connor, an analyst at Deutsche Bank AG in New York, said in a Jan. 4 note. Further share exchanges may happen in amounts “not expected to be material,” Bank of America said last month in a filing.

Moynihan risks further eroding his standing among investors if he issues more stock, after saying in August that the bank won’t “continue on a course of diluting our shareholders” as it had done after government bailouts in 2009.

Concern that Bank of America will issue new shares has plagued the stock, which sank 58 percent last year, the worst performance in the Dow Jones Industrial Average. This month, Bank of America has surged 17 percent, the most of the 30 companies in the Dow index, as investors bet that an improving U.S. economy will buoy earnings.

“All they have to do this year to have the stock rise significantly,” said KBW’s Harralson, “is show that the current share count is close to the eventual one.”

--With assistance from Donal Griffin in New York. Editors: Rick Green, Robert Friedman

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green at rgreen18@bloomberg.net

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AutoNation CEO on 2012 Outlook for U.S. Auto Sales

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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Pending Home Sales Rose 7.3% in November

December 30, 2011, 3:31 PM EST By Timothy R. Homan

Dec. 29 (Bloomberg) -- The number of Americans signing contracts to buy previously owned homes rose more than forecast in November as falling prices and low borrowing costs boosted demand.

The index of pending home sales increased 7.3 percent to the highest level since April 2010 after climbing 10.4 percent the prior month, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1.5 percent gain, according to the median estimate in a Bloomberg News survey.

The industry that triggered the 18-month recession that ended in June 2009 is showing signs of stabilizing as construction picks up, builder confidence improves and the number of houses on the market declines. Nonetheless, another wave of foreclosures may weigh on real-estate values next year.

“It looks like buyers are becoming more confident and are attracted to record-low mortgage rates,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. At the same time, he said, “activity still looks depressed by historical standards.”

Estimates for pending home sales ranged from a drop of 3 percent to an increase of 11 percent, according to the median of 30 forecasts in the Bloomberg survey.

Pending home sales were up 6.9 percent from November 2010.

All four regions showed an increase in contract signings from a month earlier, led by a 14.9 percent surge in the West and an 8.1 percent jump in the Northeast. Pending sales climbed 4.3 percent in the South and 3.3 percent in the Midwest.

Housing Affordability

“Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high,” NAR chief economist Lawrence Yun said in a statement accompanying the release. “Some of the increase in pending sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage.”

Today’s report showed an index level for pending home sales of 100.1 on a seasonally adjusted basis. A reading of 100 is consistent with the average level of contract activity in 2001 and coincides with “historically healthy” home-buying traffic, according to the NAR.

Because they track contract signings, pending home sales are considered a leading indicator. Existing-home sales are tabulated when a contract closes, typically a month or two later.

Home Sales

Reports last week showed a pickup in demand for houses. Sales of previously owned homes, which make up about 94 percent of the market, rose 4 percent to a 4.42 million annual pace, the most since January, the National Association of Realtors said Dec. 21.

Purchases of new single-family properties advanced 1.6 percent to a 315,000 annual pace, a seven-month high, figures from the Commerce Department showed Dec. 23. The increase pushed the number of new homes on the market to a record low.

“As the stabilization process moves forward, we are seeing inventory levels continuing to ease in many of our markets, which is a prerequisite for a housing recovery,” Jeffrey Mezger, chief executive officer of Los Angeles-based KB Home, said in a Dec. 21 conference call with analysts.

Even with the increase in sales, residential real estate prices continue to fall, showing a broad-based decline that indicates the market continues to be weighed down by foreclosures.

Home Values

The S&P/Case-Shiller index of property values in 20 cities dropped 3.4 percent from October 2010 after decreasing 3.5 percent in the year ended September, the New York-based group said this week. The median forecast of economists in a Bloomberg survey projected a 3.2 percent decrease.

The threat of continued declines could keep potential buyers waiting until they believe the market has bottomed, even as cheaper properties may make purchasing a home more affordable.

U.S. policy makers have initiated programs designed to revive the housing market. The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

At the Federal Reserve, officials this month reiterated that they will keep their benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

--Editors: Carlos Torres, Vince Golle

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Pending Home Sales Rose 7.3% in November

December 30, 2011, 12:14 AM EST By Timothy R. Homan

Dec. 29 (Bloomberg) -- The number of Americans signing contracts to buy previously owned homes rose more than forecast in November as falling prices and low borrowing costs boosted demand.

The index of pending home sales increased 7.3 percent to the highest level since April 2010 after climbing 10.4 percent the prior month, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1.5 percent gain, according to the median estimate in a Bloomberg News survey.

The industry that triggered the 18-month recession that ended in June 2009 is showing signs of stabilizing as construction picks up, builder confidence improves and the number of houses on the market declines. Nonetheless, another wave of foreclosures may weigh on real-estate values next year.

“It looks like buyers are becoming more confident and are attracted to record-low mortgage rates,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. At the same time, he said, “activity still looks depressed by historical standards.”

Estimates for pending home sales ranged from a drop of 3 percent to an increase of 11 percent, according to the median of 30 forecasts in the Bloomberg survey.

Pending home sales were up 6.9 percent from November 2010.

All four regions showed an increase in contract signings from a month earlier, led by a 14.9 percent surge in the West and an 8.1 percent jump in the Northeast. Pending sales climbed 4.3 percent in the South and 3.3 percent in the Midwest.

Housing Affordability

“Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high,” NAR chief economist Lawrence Yun said in a statement accompanying the release. “Some of the increase in pending sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage.”

Today’s report showed an index level for pending home sales of 100.1 on a seasonally adjusted basis. A reading of 100 is consistent with the average level of contract activity in 2001 and coincides with “historically healthy” home-buying traffic, according to the NAR.

Because they track contract signings, pending home sales are considered a leading indicator. Existing-home sales are tabulated when a contract closes, typically a month or two later.

Home Sales

Reports last week showed a pickup in demand for houses. Sales of previously owned homes, which make up about 94 percent of the market, rose 4 percent to a 4.42 million annual pace, the most since January, the National Association of Realtors said Dec. 21.

Purchases of new single-family properties advanced 1.6 percent to a 315,000 annual pace, a seven-month high, figures from the Commerce Department showed Dec. 23. The increase pushed the number of new homes on the market to a record low.

“As the stabilization process moves forward, we are seeing inventory levels continuing to ease in many of our markets, which is a prerequisite for a housing recovery,” Jeffrey Mezger, chief executive officer of Los Angeles-based KB Home, said in a Dec. 21 conference call with analysts.

Even with the increase in sales, residential real estate prices continue to fall, showing a broad-based decline that indicates the market continues to be weighed down by foreclosures.

Home Values

The S&P/Case-Shiller index of property values in 20 cities dropped 3.4 percent from October 2010 after decreasing 3.5 percent in the year ended September, the New York-based group said this week. The median forecast of economists in a Bloomberg survey projected a 3.2 percent decrease.

The threat of continued declines could keep potential buyers waiting until they believe the market has bottomed, even as cheaper properties may make purchasing a home more affordable.

U.S. policy makers have initiated programs designed to revive the housing market. The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

At the Federal Reserve, officials this month reiterated that they will keep their benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

--Editors: Carlos Torres, Vince Golle

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Homebuilders Gain on Pending Sales Data

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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Sales Seen Up 3.8% Amid Balmy Weather

December 26, 2011, 7:22 PM EST By Matt Townsend

Dec. 23 (Bloomberg) -- As Bing Crosby croons “White Christmas” in malls around the U.S., retailers from Chicago to Boston are betting on a snow-free weekend to cap a strong holiday shopping season.

Last year, a blizzard that began on Christmas closed thousands of stores on the East Coast the next day, when millions of consumers typically make exchanges and redeem gift cards.

The calendar is also lending a potential boost. Christmas Eve lands on a Saturday, and Macy’s Inc., Toys “R” Us Inc. and Family Dollar Stores Inc. are all extending their hours. The day after Christmas, one of the biggest shopping days of the year, is Monday. Last year, it fell on Sunday, when religious services and football games kept people away from malls.

“It’s going to be hugely better after last year was a wipeout for about 15 percent of the country,” said Craig Johnson, president of consulting firm Customer Growth Partners. That could boost sales in stores and on the Web Dec. 26 from an estimated $20 billion last year to $29 billion and make it the year’s largest shopping day, he said in an interview.

No major snowstorms are forecast for the U.S. this weekend, continuing one of the warmest and driest holiday seasons on record. U.S. snowfall this month is projected to be as little as 450 inches, about half the amount that fell last December, according Berwyn, Pennsylvania-based Planalytics Inc.

U.K.’s Boxing Day

Same goes in the U.K., which has had above-average temperatures and little snow after several blizzards, including one in late December, hit the country last year. While holiday retail sales are projected to be little changed, store visits rose 0.6 percent last week from a year ago, according to Experian FootFall, a research firm based in Solihull, England. London may be disrupted if transit workers proceed with a strike beginning on Dec. 26, which is called Boxing Day and has been one of the nation’s biggest shopping events.

“The 48 hours before Christmas from Friday to Saturday will be mega,” Jace Tyrrell, a spokesman for London’s New West End Company, which represents more than 600 fashion brands, said in an interview.

One of the effects of the balmy weather, including North America’s fourth-warmest November of the past 50 years, is less demand for sweaters and jackets. As a result, such U.S. apparel chains as Abercrombie & Fitch Co. and Gap Inc. have been discounting cold-weather gear, with markdowns of as much as 70 percent last weekend, Stacy Pak, a San Francisco-based analyst for Barclays Capital, said in a Dec. 20 note to clients.

Super Saturday

In the U.S., the final holiday push comes as consumers ended the traditional shopping lull after Thanksgiving weekend by spending $26 billion on the Web and in stores on Dec. 17, according to Johnson. That day, marketed by retailers as Super Saturday, with some of the best deals of the season, fell just short of the $27 billion spent on Black Friday, New Canaan, Connecticut-based Customer Growth said.

Revenue during Thanksgiving weekend increased 16 percent to a record $52.4 billion, prompting the Standard & Poor’s 500 Retailing Index to advance 3.1 percent on Monday, Nov. 28, for the biggest gain in a month. Since then, the measure has risen another 2 percent, compared with a 5.2 percent increase for the Standard & Poor’s 500 Index.

November same-store sales rose 3.2 percent, topping analysts’ expectations. That performance prompted the National Retail Federation and ShopperTrak to raise their projections for holiday sales in retail stores to gains of 3.8 percent and 3.7 percent, respectively. Customer Growth Partners, which includes online sales, left its estimate unchanged at an increase of 6.5 percent.

Last-Minute Shoppers

On top of that, 30 percent of consumers had holiday shopping left to do entering this week, an increase from 26 percent a year ago, according to the International Council of Shopping Centers.

Chains are trying to attract those last-minute shoppers by extending store hours. Closely held Toys “R” Us planned to keep almost all of its 600 U.S. locations open for 112 uninterrupted hours from Dec. 20 to Christmas Eve. The Wayne, New Jersey-based retailer’s flagship in New York’s Times Square will push that to more than 200 hours.

Macy’s, the second-largest U.S. department store chain, is opening some locations for 83 straight hours and extending closing hours to 2 a.m. at others.

Family Dollar, based in Matthews, North Carolina, will operate on Christmas for the first time by opening about half of its 7,000-plus stores from 10 a.m. to 3 p.m. This came after it added an extra hour to all its stores for this entire month.

Extended Hours

These extended hours are the latest example of retailers going after sales by any means necessary, according to Poonam Goyal, a Bloomberg Industries analyst in Princeton, New Jersey.

Consumers started seeing Black Friday deals just after Halloween, a month before the actual Black Friday. Several chains, including Kohl’s Corp., opened at midnight on Thanksgiving for the first time while Wal-Mart Stores Inc. moved its release of Black Friday deals to two hours before that. Most of the industry offered some kind of free shipping deal. When shopping events passed, a few chains repeated them.

“There aren’t many more buttons they can push,” Goyal said in an interview. All of this will drive sales, she said, while “margins are a different question.”

--With assistance from Cotten Timberlake in Washington and Sarah Shannon in London. Editors: Robin Ajello, John Brecher

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

View the original article here

Sales Seen Up 3.8% Amid Balmy Weather

December 25, 2011, 11:22 PM EST By Matt Townsend

Dec. 23 (Bloomberg) -- As Bing Crosby croons “White Christmas” in malls around the U.S., retailers from Chicago to Boston are betting on a snow-free weekend to cap a strong holiday shopping season.

Last year, a blizzard that began on Christmas closed thousands of stores on the East Coast the next day, when millions of consumers typically make exchanges and redeem gift cards.

The calendar is also lending a potential boost. Christmas Eve lands on a Saturday, and Macy’s Inc., Toys “R” Us Inc. and Family Dollar Stores Inc. are all extending their hours. The day after Christmas, one of the biggest shopping days of the year, is Monday. Last year, it fell on Sunday, when religious services and football games kept people away from malls.

“It’s going to be hugely better after last year was a wipeout for about 15 percent of the country,” said Craig Johnson, president of consulting firm Customer Growth Partners. That could boost sales in stores and on the Web Dec. 26 from an estimated $20 billion last year to $29 billion and make it the year’s largest shopping day, he said in an interview.

No major snowstorms are forecast for the U.S. this weekend, continuing one of the warmest and driest holiday seasons on record. U.S. snowfall this month is projected to be as little as 450 inches, about half the amount that fell last December, according Berwyn, Pennsylvania-based Planalytics Inc.

U.K.’s Boxing Day

Same goes in the U.K., which has had above-average temperatures and little snow after several blizzards, including one in late December, hit the country last year. While holiday retail sales are projected to be little changed, store visits rose 0.6 percent last week from a year ago, according to Experian FootFall, a research firm based in Solihull, England. London may be disrupted if transit workers proceed with a strike beginning on Dec. 26, which is called Boxing Day and has been one of the nation’s biggest shopping events.

“The 48 hours before Christmas from Friday to Saturday will be mega,” Jace Tyrrell, a spokesman for London’s New West End Company, which represents more than 600 fashion brands, said in an interview.

One of the effects of the balmy weather, including North America’s fourth-warmest November of the past 50 years, is less demand for sweaters and jackets. As a result, such U.S. apparel chains as Abercrombie & Fitch Co. and Gap Inc. have been discounting cold-weather gear, with markdowns of as much as 70 percent last weekend, Stacy Pak, a San Francisco-based analyst for Barclays Capital, said in a Dec. 20 note to clients.

Super Saturday

In the U.S., the final holiday push comes as consumers ended the traditional shopping lull after Thanksgiving weekend by spending $26 billion on the Web and in stores on Dec. 17, according to Johnson. That day, marketed by retailers as Super Saturday, with some of the best deals of the season, fell just short of the $27 billion spent on Black Friday, New Canaan, Connecticut-based Customer Growth said.

Revenue during Thanksgiving weekend increased 16 percent to a record $52.4 billion, prompting the Standard & Poor’s 500 Retailing Index to advance 3.1 percent on Monday, Nov. 28, for the biggest gain in a month. Since then, the measure has risen another 2 percent, compared with a 5.2 percent increase for the Standard & Poor’s 500 Index.

November same-store sales rose 3.2 percent, topping analysts’ expectations. That performance prompted the National Retail Federation and ShopperTrak to raise their projections for holiday sales in retail stores to gains of 3.8 percent and 3.7 percent, respectively. Customer Growth Partners, which includes online sales, left its estimate unchanged at an increase of 6.5 percent.

Last-Minute Shoppers

On top of that, 30 percent of consumers had holiday shopping left to do entering this week, an increase from 26 percent a year ago, according to the International Council of Shopping Centers.

Chains are trying to attract those last-minute shoppers by extending store hours. Closely held Toys “R” Us planned to keep almost all of its 600 U.S. locations open for 112 uninterrupted hours from Dec. 20 to Christmas Eve. The Wayne, New Jersey-based retailer’s flagship in New York’s Times Square will push that to more than 200 hours.

Macy’s, the second-largest U.S. department store chain, is opening some locations for 83 straight hours and extending closing hours to 2 a.m. at others.

Family Dollar, based in Matthews, North Carolina, will operate on Christmas for the first time by opening about half of its 7,000-plus stores from 10 a.m. to 3 p.m. This came after it added an extra hour to all its stores for this entire month.

Extended Hours

These extended hours are the latest example of retailers going after sales by any means necessary, according to Poonam Goyal, a Bloomberg Industries analyst in Princeton, New Jersey.

Consumers started seeing Black Friday deals just after Halloween, a month before the actual Black Friday. Several chains, including Kohl’s Corp., opened at midnight on Thanksgiving for the first time while Wal-Mart Stores Inc. moved its release of Black Friday deals to two hours before that. Most of the industry offered some kind of free shipping deal. When shopping events passed, a few chains repeated them.

“There aren’t many more buttons they can push,” Goyal said in an interview. All of this will drive sales, she said, while “margins are a different question.”

--With assistance from Cotten Timberlake in Washington and Sarah Shannon in London. Editors: Robin Ajello, John Brecher

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

View the original article here

Sales Seen Up 3.8% Amid Balmy Weather

December 24, 2011, 12:14 PM EST By Matt Townsend

Dec. 23 (Bloomberg) -- As Bing Crosby croons “White Christmas” in malls around the U.S., retailers from Chicago to Boston are betting on a snow-free weekend to cap a strong holiday shopping season.

Last year, a blizzard that began on Christmas closed thousands of stores on the East Coast the next day, when millions of consumers typically make exchanges and redeem gift cards.

The calendar is also lending a potential boost. Christmas Eve lands on a Saturday, and Macy’s Inc., Toys “R” Us Inc. and Family Dollar Stores Inc. are all extending their hours. The day after Christmas, one of the biggest shopping days of the year, is Monday. Last year, it fell on Sunday, when religious services and football games kept people away from malls.

“It’s going to be hugely better after last year was a wipeout for about 15 percent of the country,” said Craig Johnson, president of consulting firm Customer Growth Partners. That could boost sales in stores and on the Web Dec. 26 from an estimated $20 billion last year to $29 billion and make it the year’s largest shopping day, he said in an interview.

No major snowstorms are forecast for the U.S. this weekend, continuing one of the warmest and driest holiday seasons on record. U.S. snowfall this month is projected to be as little as 450 inches, about half the amount that fell last December, according Berwyn, Pennsylvania-based Planalytics Inc.

U.K.’s Boxing Day

Same goes in the U.K., which has had above-average temperatures and little snow after several blizzards, including one in late December, hit the country last year. While holiday retail sales are projected to be little changed, store visits rose 0.6 percent last week from a year ago, according to Experian FootFall, a research firm based in Solihull, England. London may be disrupted if transit workers proceed with a strike beginning on Dec. 26, which is called Boxing Day and has been one of the nation’s biggest shopping events.

“The 48 hours before Christmas from Friday to Saturday will be mega,” Jace Tyrrell, a spokesman for London’s New West End Company, which represents more than 600 fashion brands, said in an interview.

One of the effects of the balmy weather, including North America’s fourth-warmest November of the past 50 years, is less demand for sweaters and jackets. As a result, such U.S. apparel chains as Abercrombie & Fitch Co. and Gap Inc. have been discounting cold-weather gear, with markdowns of as much as 70 percent last weekend, Stacy Pak, a San Francisco-based analyst for Barclays Capital, said in a Dec. 20 note to clients.

Super Saturday

In the U.S., the final holiday push comes as consumers ended the traditional shopping lull after Thanksgiving weekend by spending $26 billion on the Web and in stores on Dec. 17, according to Johnson. That day, marketed by retailers as Super Saturday, with some of the best deals of the season, fell just short of the $27 billion spent on Black Friday, New Canaan, Connecticut-based Customer Growth said.

Revenue during Thanksgiving weekend increased 16 percent to a record $52.4 billion, prompting the Standard & Poor’s 500 Retailing Index to advance 3.1 percent on Monday, Nov. 28, for the biggest gain in a month. Since then, the measure has risen another 2 percent, compared with a 5.2 percent increase for the Standard & Poor’s 500 Index.

November same-store sales rose 3.2 percent, topping analysts’ expectations. That performance prompted the National Retail Federation and ShopperTrak to raise their projections for holiday sales in retail stores to gains of 3.8 percent and 3.7 percent, respectively. Customer Growth Partners, which includes online sales, left its estimate unchanged at an increase of 6.5 percent.

Last-Minute Shoppers

On top of that, 30 percent of consumers had holiday shopping left to do entering this week, an increase from 26 percent a year ago, according to the International Council of Shopping Centers.

Chains are trying to attract those last-minute shoppers by extending store hours. Closely held Toys “R” Us planned to keep almost all of its 600 U.S. locations open for 112 uninterrupted hours from Dec. 20 to Christmas Eve. The Wayne, New Jersey-based retailer’s flagship in New York’s Times Square will push that to more than 200 hours.

Macy’s, the second-largest U.S. department store chain, is opening some locations for 83 straight hours and extending closing hours to 2 a.m. at others.

Family Dollar, based in Matthews, North Carolina, will operate on Christmas for the first time by opening about half of its 7,000-plus stores from 10 a.m. to 3 p.m. This came after it added an extra hour to all its stores for this entire month.

Extended Hours

These extended hours are the latest example of retailers going after sales by any means necessary, according to Poonam Goyal, a Bloomberg Industries analyst in Princeton, New Jersey.

Consumers started seeing Black Friday deals just after Halloween, a month before the actual Black Friday. Several chains, including Kohl’s Corp., opened at midnight on Thanksgiving for the first time while Wal-Mart Stores Inc. moved its release of Black Friday deals to two hours before that. Most of the industry offered some kind of free shipping deal. When shopping events passed, a few chains repeated them.

“There aren’t many more buttons they can push,” Goyal said in an interview. All of this will drive sales, she said, while “margins are a different question.”

--With assistance from Cotten Timberlake in Washington and Sarah Shannon in London. Editors: Robin Ajello, John Brecher

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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Sales of U.S. New Homes in November Rise to 315,000 Rate

December 25, 2011, 12:32 AM EST By Timothy R. Homan

(Updates with economist’s comment in fourth paragraph.)

Dec. 23 (Bloomberg) -- Sales of new U.S. homes rose in November to a seven-month high, adding to evidence of stabilization in the housing market.

Purchases of single-family properties increased 1.6 percent to a 315,000 annual pace, figures from the Commerce Department showed today in Washington. The gain pushed the number of new homes on the market to a record low.

The industry that precipitated the 18-month recession that ended in June 2009 is on the mend as construction picks up, builder confidence improves and inventories of existing homes decline. At the same time, another wave of foreclosures may weigh on real estate values next year.

“All of the housing numbers have looked a lot better recently,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Things aren’t getting any worse now and that’s an improvement.”

The November pace matched the median of 73 economists’ projections in a Bloomberg News survey. Estimates ranged from 298,000 to 350,000. The government revised October demand to a 310,000 rate from a previously reported 307,000.

Stocks held gains after the report, with the Standard & Poor’s 500 Index climbing 0.4 percent to 1,258.71 at 10:14 a.m. in New York. The yield on the benchmark 10-year Treasury note rose to 2.01 percent from 1.95 percent late yesterday.

Separate figures today showed personal spending rose less than forecast and an increase in orders for big-ticket items. Purchases rose 0.1 percent for a second month, according to the Commerce Department. Incomes also grew 0.1 percent, the weakest in three months, after a 0.4 percent rise in October.

Factory Orders

Orders for durable goods jumped 3.8 percent in November, led by a surge in bookings for aircraft, the agency also said. Demand for business equipment dropped 1.2 percent in November, the most since January.

The increase in new-home purchases was paced by a 12.9 percent jump in the South and a 7.5 percent gain in the Midwest Demand plunged 26.3 percent in the Northeast to the lowest on record. Sales slumped 16.9 percent in the West.

The median price of a new house purchased last month fell 2.5 percent from November 2010 to $214,100, the cheapest in a year, today’s report showed.

The supply of homes at the current sales rate dropped to 6 months’ worth, the lowest since March 2006, from 6.2 months in October. There were 158,000 new houses on the market at the end of last month, the fewest since record-keeping began in 1963.

Weakest Year

Still, 2011 may surpass last year as the weakest ever for new-home sales. Demand is on pace to reach 304,000 this year, less than the 323,000 in 2010 that was the lowest since data- keeping began, according to Bloomberg calculations.

Sales of previously owned homes, which make up about 94 percent of the market, rose 4 percent to a 4.42 million annual pace, the most since January, the National Association of Realtors said this week. The group revised down figures going back to 2007 by an average 14 percent, putting them more in line with other measures of demand.

New-home sales, which are tabulated when contracts are signed, have lost their ability to forecast the broader market as demand shifts to previously owned houses. Purchases of existing houses are calculated when a deal closes about a month or two later.

Builders increased work on new projects last month. Housing starts rose 9.3 percent to a 685,000 rate in November, the fastest pace since April 2010, Commerce Department data show. That compares with last year’s tally of 587,000, the second- fewest on record after 2009’s record low of 554,000.

KB Home

KB Home, the Los Angeles-based homebuilder that targets first-time buyers, this week reported a decline in quarterly profit and gross margins weaker than the company forecast earlier.

At the same time, the Los Angeles-based builder said net orders increased 38 percent in the fourth quarter from the same three months last year.

Policy makers are pushing programs aimed at reviving the U.S. housing market. The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

Federal Reserve officials reiterated at a meeting this month that they will keep their benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

--Editor: Vince Golle

Company News:

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Home Sales: Worse Than You Thought

December 21, 2011, 10:32 AM EST By Timothy R. Homan

Dec. 21 (Bloomberg) -- Fewer existing homes were sold since 2007 than previously estimated, painting an even bleaker picture of the industry that precipitated the U.S. recession, a report from the National Association of Realtors will show today.

“Although there are downward revisions for total sales in recent years, there is little change to previously reported monthly comparisons or characterizations based on percentage change,” Walter Molony, a spokesman for the group, said in an e-mailed statement last week. He said the revisions will include comparable reductions in inventories and no change in prices.

CoreLogic Inc., a real-estate analytics company, released a report in February showing that 3.3 million existing homes were sold in 2010, less than the 4.91 million tallied by NAR. Today’s report will also show that purchases increased to a 5.05 million annual rate in November from 4.97 million the prior month, according to the median forecast of 71 economists surveyed by Bloomberg News.

The range of November estimates, from a low of 4.38 million to a high of 5.25 million, was wider than normal because some economists factored in assumptions for the NAR revisions while others didn’t.

Housing, which helped trigger the 18-month recession that ended in June 2009 when subprime borrowers defaulted, is showing signs of stabilizing as builder confidence improves and construction picks up. Nonetheless, another wave of foreclosures will probably push prices down further as more marked-down properties come on the market.

‘Steep Correction’

“Housing’s done an incredibly steep correction,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “In general, demand for houses is still pretty weak. We have a big supply, a big shadow inventory.”

The NAR data are due at 10 a.m. in Washington.

Figures from other trackers of home sales show a slower pace of purchases compared with NAR. CoreLogic, based in Santa Ana, California, monitors sales figures through property records at local courthouses, while NAR follows sales through the multiple-listing services used by real-estate agents.

NAR tallies in recent years may have been overstated because the consolidation of listing services could have caused distortions in the data, according to Lawrence Yun, chief economist at the Realtors’ group. He said estimates of direct sales by owners may also have been overstated.

Market Strains

“The benchmark revision to the NAR data should be watched extra carefully by long-term investors, as we expect the revision to reflect the ‘strains’ in housing markets that we find in” figures from Fannie Mae and Freddie Mac, Herrmann, who is projecting demand will be revised down by about 9 percent, said in a research note this week.

The median value of an existing house fell to $162,500 in October from $170,600 a year earlier, according to NAR data. The value plunged from a July 2006 record of $230,300 to a low of $156,100 in February.

There are signs the industry may be stabilizing. Builders broke ground on more houses in November than at any time in the past 19 months and construction permits climbed to the highest level since March 2010, Commerce Department data showed yesterday.

The National Association of Home Builders/Wells Fargo index of builder confidence rose in December for a third straight month, reaching the highest level since May 2010.

No Slowdown

“November is a time that historically sales slow down,” Larry Sorsby, chief financial officer at builder Hovnanian Enterprises Inc., said on a Dec. 15 call with analysts. “And this year we’ve not seen as dramatic a slowdown as we have in recent prior years. The market feels a little bit better than we would have expected.”

The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders surged yesterday after a report showed housing starts climbed. The gauge jumped 6.4 percent, compared with a 3 percent increase for the broader S&P 500 Index.

The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

Federal Reserve policy makers reiterated at a meeting this month that they will keep the benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Scott Lanman

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Lloyds Said to Seek About 2.5 Billion Pounds From Branch Sales

July 05, 2011, 11:01 AM EDT By Ambereen Choudhury and Gavin Finch

July 5 (Bloomberg) -- Lloyds Banking Group Plc, Britain’s biggest mortgage lender, is seeking about 2.5 billion pounds ($4 billion) for the 632 branches it’s selling to comply with a European Union ruling on taxpayer aid, two people familiar with the sales process said.

The deadline for the first round of bids is next week, said the people, who declined to be identified because the matter is private. A Lloyds spokeswoman declined to comment.

--Editors: Francis Harris, Edward Evans

To contact the reporter on this story: Gavin Finch at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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Disappointing Hardware Sales Hit Oracle Stock

By Aaron Ricadela

(Bloomberg) — Oracle Corp. dropped in late trading yesterday after reporting a decline in hardware sales, fueling concern the top maker of database software may not be benefiting as much as predicted from its Sun Microsystems Inc. acquisition.

Hardware sales declined 6 percent to $1.16 billion, Redwood City, California-based Oracle said in a statement yesterday. The company had forecast in March an increase of 6 percent to 12 percent. Shares fell as much as 7.5 percent in extended trading.

Chief Executive Officer Larry Ellison bought Sun last year to capitalize on demand for the servers and databases used in data centers. While the hardware results may reflect Oracle's effort to pare less-profitable machines from the lineup, they were disappointing enough to overshadow better-than-predicted performance in profit and sales of new software licenses.

"This is really the first full year-over-year compare for the hardware business, and it has started on the wrong foot," said Josh Olson, an analyst at Edward Jones & Co. in Des Peres, Missouri.

Hardware gross margin, a measure of profitability, rose to 56 percent in the fourth quarter from 46 percent last year, a sign Oracle is making headway selling higher-margin machines.

Oracle is adding sales staff, preparing new computers for release this year and pitching hardware support contracts to boost sales of Sun machines, executives said on a conference call.

Oracle fell as much as $2.45 to $30.01 in late trading yesterday. It had climbed 26? to $32.46 on the Nasdaq Stock Market, and gained 3.7 percent this year before today.

Profit excluding certain costs was 75? a share in the quarter that ended May 31, exceeding the 71? average estimate of analysts surveyed by Bloomberg. Sales climbed 13 percent to $10.8 billion, meeting analysts' predictions.

Hardware sales may rebound in the current quarter, which ends in August, Oracle Chief Financial Officer Safra Catz said on a conference call. Sales of hardware products may range from a 5 percent increase to a 5 percent decline, Catz said.

New software license sales, a predictor of future sales, will rise 10 percent to 20 percent, she said. Profit excluding certain items will be 45? to 48?, compared with 46? projected by analysts, the company said.

Calculated on a basis that doesn't comply with generally accepted accounting principles, revenue will increase 9 percent to 12 percent this quarter, Catz said. That implies sales of $8.27 billion to $8.5 billion, compared with $8.3 billion, the average estimate of analysts surveyed by Bloomberg.

New license sales gained 19 percent last quarter to $3.74 billion, at the high end of Oracle's forecast. That compares with the 13.5 percent growth predicted by Jason Maynard, an analyst at Wells Fargo Securities, in a June 20 research note.

Ellison is using his purchase of Sun to add computers to the arsenal of programs he has amassed through more than $42 billion in acquisitions since 2005. Oracle has tailored its databases to run faster on new machines using Sun hardware.

The company also has aimed to improve the unit's profit by discontinuing sales of less expensive products and emphasizing its high-performance Exadata and Exalogic computer servers. That may have contributed to the revenue decline, said Peter Goldmacher, an analyst at Cowen & Co. in San Francisco.

Oracle may also be grappling with growing pains related to the buying spree, Goldmacher said.

"The more they acquire and the further afield they get from their core competence, the harder it is to manage the business," Goldmacher said.

Oracle co-President Mark Hurd told analysts Oracle is selling fewer servers at higher prices, and increasing the amount of support contracts and software sold with each system.

"There's no question we want to grow the top line, but we want to grow the top line right," he said.

Ellison said during the conference call that Oracle is taking a pause from large acquisitions because many potential targets are overpriced.

"They're by and large not attractively priced now and don't make sense, so we're not doing them," he said. "Instead we can focus our energies on organic growth."

At Oracle's OpenWorld conference, which begins Oct. 2 in San Francisco, the company plans to announce a computer system for analyzing data in a computer's memory instead of on a disk. Oracle also plans what it calls a "big-data accelerator," a product that will use open-source Hadoop software to help companies handle large amounts of data from various sources.

Oracle's sales growth is expected to taper off as year-earlier figures reflect the acquisition. Sales are projected to increase 8.8 percent to $39 billion in 2012 after surging 34 percent in 2011, according to a Bloomberg survey of analysts.

Ricadela is a reporter for Bloomberg News and Bloomberg Businessweek in San Francisco.

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Bank of America Combines U.S. Leveraged-Loan Sales Forces

June 02, 2011, 7:02 AM EDT By Kristen Haunss

June 2 (Bloomberg) -- Bank of America Corp., the largest underwriter of U.S. leveraged loans this year, combined most of its loan sales forces into one team and named Douglas Antonacci and Howard Sysler to jointly head the group.

The team that had been responsible for selling loans in the secondary market will join with members of the one that markets new institutional term loans, according to an internal memo obtained by Bloomberg News. Kerrie McHugh, a Bank of America spokeswoman, confirmed the contents of the memo.

Bank of America is merging the two groups in an effort to give clients a single point of contact for multiple types of loan-sales transactions, according to a person familiar with the changes, who declined to be identified because the information isn’t public. The Charlotte, North Carolina-based bank controls 16.4 percent of the U.S. leveraged-loan market compared with JPMorgan Chase & Co.’s 14.9 percent share, according to data compiled by Bloomberg.

“This new structure will benefit our sales, trading and new issue businesses, as well as improve synergies between our loan origination and sales teams,” according to the memo from David Flannery, head of global leveraged finance, Graham Goldsmith, head of global loans and special situations group and Bryan Weadock, co-head of global fixed-income commodities and currencies sales.

Bank of America’s primary loan sales team will be responsible for the remainder of new issue loans and will remain part of the global capital markets group, according to the memo.

Antonacci and Sysler are both based in New York and will report to Steve Hollender and Gerry Walker, co-heads of credit sales.

Among the largest loans Bank of America has helped arrange this year is a $2.7 billion term loan for Del Monte Foods Co. The bank also was part the financing group on $7.5 billion in loans and bonds last month for Chrysler Group LLC.

This year, $279.9 billion of leveraged loans have been issued in the U.S., Bloomberg data show. That’s an 87 percent increase from the same time period last year, according to the data.

--Editors: Chapin Wright, Mitchell Martin

To contact the reporter on this story: Kristen Haunss in New York at khaunss@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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U.S. Existing-Home Sales Unexpectedly Fall

May 19, 2011, 4:36 PM EDT By Bob Willis and Shobhana Chandra

(Updates with closing markets in fifth paragraph.)

May 19 (Bloomberg) -- Sales of existing U.S. homes unexpectedly declined, manufacturing in the Philadelphia region slowed and consumer confidence dropped, pointing to an economy that is struggling to regain momentum following the surge in energy costs.

Purchases of existing homes decreased 0.8 percent to a 5.05 million annual pace in April, the National Association of Realtors said today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index fell in May to the weakest reading in seven months, and the Bloomberg Consumer Comfort Index slumped to a nine-month low, other reports showed.

Gasoline prices hovering close to $4 a gallon and rising grocery bills may discourage American households from taking on big purchases like houses just as manufacturing cools after leading the economy out of the recession. Another report showing claims for jobless benefits are retreating after an April surge raises the odds any economic slowdown will prove temporary.

“We’re going through a soft patch,” said Eric Green, chief market economist at TD Securities Inc. in New York. “Housing is just bouncing along the bottom. Job demand is real, and we’re going to emerge past this soft patch.”

Stocks advanced, helped by the larger-than-forecast decline in jobless claims. The Standard & Poor’s 500 Index rose 0.2 percent to 1,343.6 at the 4 p.m. close in New York. Earlier, stocks declined after the reports on housing, confidence and manufacturing, combined with a worse-than-projected reading for the index of leading economic indicators.

Worse Than Forecast

The median forecast of 75 economists surveyed by Bloomberg News projected sales of existing houses would climb to a 5.2 million rate. Estimates ranged from 5.09 million to 5.40 million. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.

As of March 31, about 5.6 million houses were either in foreclosure or their owners were more than 30 days late in making mortgage payments, according to Bloomberg calculations, raising the risk that property values will keep falling. That would make any sustained recovery difficult to achieve.

About 37 percent of all transactions last month were of distressed properties, which were either in foreclosure or short sales where a bank agrees to take less than the outstanding mortgage balance, according to today’s report from the agents’ group. Cash transactions accounted for 31 percent after a record 35 percent in March, NAR chief economist Lawrence Yun said in a press conference as the figures were released.

The Realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun has said.

Distressed Sales

“Existing-home sales continue to have a strong bent to distressed sales and all-cash deals, which implies ongoing weakness in prices,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

Manufacturers, facing a less pressing need to rebuild inventories and supply disruptions following the earthquake and tsunami in Japan, may also be slowing down. The Federal Reserve Bank of Philadelphia’s general economic index fell to 3.9, the weakest reading since October, from 18.5 a month earlier. Figures greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

The report “points to a slowing, but not a dramatic slowing, in manufacturing,” said Bricklin Dwyer, an economist at BNP Paribas in New York. “The inventory rebuilding cycle has tapered off and now we have a normalization,” he said, and “Japanese supply-chain disruptions are likely reflected.”

Confidence Wanes

The Bloomberg Consumer Comfort Index declined to minus 49.4 in the period to May 15, the worst reading since August, from the prior week’s minus 46.9. A gauge of personal finances plunged to the weakest level since October 2009, and a monthly measure of economic expectations held at a seven-month low.

Retailers like Wal-Mart Stores Inc. are among those seeing sales drop as energy prices climb, pointing to a slowdown in consumer purchases, which account for about 70 percent of the economy. The world’s largest retailer this week said sales at U.S. stores open at least a year dropped 1.1 percent, the eighth decline in a row. Customers are still struggling with economic uncertainty, buying more generic items rather than their more costly name-brand counterparts, executives said in a May 17 pre- recorded call.

Customers are making fewer trips to stores because of the increase in fuel prices, U.S. stores chief Bill Simon said on the call.

Leaders Drop

The Conference Board’s index of leading indicators, a gauge of the outlook for the next three to six months, fell 0.3 percent in April, the first drop in 10 months, the New York- based group said. The measure was depressed by a pickup in jobless claims that reflected temporary setbacks including auto- plant shutdowns caused by the disaster in Japan.

“Momentum is softening,” said Bank of America Merrill Lynch’s Dutta. “The manufacturing sector is losing some of its luster, softening alongside the broader economy.”

Another report today showed fewer Americans than forecast filed first-time claims for unemployment benefits last week. Applications declined by 29,000 to 409,000, according to figures from the Labor Department. Economists projected 420,000, according to the median forecast in a Bloomberg survey.

Applications for unemployment benefits surged last month due to events that seasonal variations failed to take into account, such as a late school holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan, the Labor Department has said.

Claims “are unwinding the run-up in April,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. “The labor market is slowly improving. It allows slow, but positive growth in consumer spending.”

--With assistance from Chris Middleton, Timothy R. Homan and Alex Kowalski in Washington. Editors: Carlos Torres, Vince Golle

To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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U.S. Existing-Home Sales Probably Rose for a Second Month

May 19, 2011, 12:22 AM EDT By Bob Willis

May 19 (Bloomberg) -- Sales of previously owned U.S. homes probably rose for a second month in April as investors used cash to buy distressed properties, a reminder real-estate is struggling to gain traction almost two years into the recovery, economists said before a report today.

Purchases of existing houses rose 2 percent to a 5.2 million annual pace, according to the median forecast of 75 economists surveyed by Bloomberg News. Other reports may show fewer Americans applied for unemployment benefits last week and manufacturing expanded in the Philadelphia region.

The increase in home demand is helping clear the market of inventory even as renewed foreclosures will probably continue weighing on prices. Manufacturing has so far carried the economy, validating the Federal Reserve’s decision to maintain record stimulus until the recovery becomes self-sustaining.

“We are seeing a pickup in all-cash transactions,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. “All-cash bargaining power and investment activity is helping absorb the supply. We will continue to see a gradual pickup in demand.”

The National Association of Realtors will release the figures at 10 a.m. in Washington. Estimates for home sales in the Bloomberg survey ranged from 5.09 million to 5.40 million. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.

Homebuilders are seeing no gain in demand as they are forced to compete with foreclosed properties. Builders began work on 523,000 houses at an annual rate in April, down 11 percent from the prior month, the Commerce Department reported this week. Housing starts dropped to a record low of 478,000 in April 2009.

Reduced Optimism

Confidence among homebuilders remains at recession levels. The National Association of Home Builders/Wells Fargo sentiment index held at 16 in May as a measure of sales expectations for the next six months fell to an eight-month low, the group said this week.

Douglas Yearley Jr., chief executive officer at Toll Brothers Inc., the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”

Demand for new houses will remain weak into 2012, said Bill Wheat, chief financial officer of D.R. Horton Inc., who last week also projected a housing recovery will take time to develop.

“We don’t see the economic drivers to change in 2011,” said Wheat, whose Fort Worth, Texas-based company is the second- largest homebuilder by revenue. “We feel it could still be a struggle in 2012.”

Fed Minutes

The Fed, in minutes of its April 26-27 policy meeting released yesterday, said the housing market “remained very weak as the large overhang of foreclosed and distressed properties continued to restrain new construction.”

The manufacturing industries that make up 12 percent of the economy continue to spearhead the recovery that began in June 2009, led by business spending on new equipment and demand from emerging economies like China, Brazil and Mexico. American exports in March rose to the highest level on record.

The Federal Reserve Bank of Philadelphia’s factory index may have climbed to 20 this month from 18.5 in April, according to the median estimate of economists surveyed before the 10 a.m. release.

Caterpillar Inc. last month posted first-quarter profit that topped analysts’ estimates and raised its full-year earnings forecast as sales surged in developing countries. The Peoria, Illinois-based maker of earthmoving equipment said its outlook would have been higher had it not been for the March 11 earthquake in Japan.

Factory Shares

Industrial companies have outperformed homebuilders this year. The Standard & Poor’s Supercomposite Machinery Index has gained 5.9 percent since Dec. 31, compared with a 1.3 percent decline for the S&P Supercomposite Homebuilding Index.

Another report today may signal the economic recovery is cooling. The Conference Board’s index of leading indicators rose 0.1 percent in April, compared with a 0.4 percent gain the prior month, economists forecast the 10 a.m. report will show. The projected increase in the gauge, which is designed to signal the economy’s path over the next three to six months, would be the smallest since August.

A jump in claims for unemployment insurance benefits last month is one reason the leading index moderated. A Labor Department report at 8:30 a.m. may show that increase through April is now reversing.

The number of applications for jobless benefits fell to 420,000 last week from 434,000 the prior week, according to the survey median. Claims would still exceed the 375,000 reached in February, a two-year low.

--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Treasuries Drop Amid Mixed Economic Data, $72 Billion Debt Sales

May 14, 2011, 12:49 AM EDT By Susanne Walker

May 14 (Bloomberg) -- Treasuries fell for the first time in five weeks as mixed economic data and a rebound in commodities cooled demand for the safety of U.S. debt.

U.S. 10-year note yields touched the lowest since December yesterday on speculation that inflation may have peaked after the Labor Department reported the consumer price index rose 0.4 percent in April, matching economists’ forecast. The U.S. sold $72 billion in notes and bonds this week and will auction $11 billion in Treasury Inflation Protected Securities next week. The Federal Reserve will release minutes of last month’s policy meeting on May 18.

“Yields being low is because the economy is not generating enough forward momentum to suggest rising commodity prices will be passed through the underlying rate of inflation,” said Steven Ricchiuto, chief economist in New York at Mizuho Securities USA Inc. “There’s a lot of mixed data and mixed signals and it’s creating a very choppy trading environment.”

Yields on 10-year notes rose two basis points to 3.17 percent in New York, according to Bloomberg Bond Trader prices, from 3.15 percent on May 6. The yield yesterday reached 3.13 percent, the least since Dec. 8. It touched a 2011 high of 3.77 percent in February.

Yield Data

The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt known as the break- even rate, narrowed yesterday to 2.39 percentage points from 2.67 percentage points on April 11, which was the widest in three years.

“As we look back at the week and forward to the next, one begins to get the feeling that the U.S. economy is not about to run away from anyone,” Kevin Giddis, president of fixed-income capital markets at the brokerage firm Morgan Keegan Inc. in Memphis, Tennessee, wrote yesterday in a note to clients. “Some of the major issues like housing and jobs are slow to get better.”

The Standard & Poor’s GSCI Index of 24 raw materials moved up by 1.4 percent this week after dropping 11 percent last week. The Standard & Poor’s 500 Index trimmed weekly gains, dropping by 0.8 percent yesterday. The Index dropped 1.1 percent this month through May 12 as gauges of energy and raw-materials producers slumped with metal and oil prices.

Jobs Trend

A report on May 12 showed the number of Americans filing first-time claims for unemployment insurance payments fell less than forecast last week, indicating recovery in the labor market is taking time to accelerate. Applications for jobless benefits decreased 44,000 in the week ended May 7 to 434,000, Labor Department figures showed. Economists forecast 430,000 claims, according to the median estimate in a Bloomberg News survey.

A separate report on May 12 showed sales at U.S. retailers rose in April and the March gain was revised higher, sending Treasury yields higher that day.

“The consumer is still in the game,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York. “It’s not telling you the consumer is retrenching or buying everything off the shelf.”

Off the Shelf

Sales at U.S. retailers April reflected gains at service stations and grocery stores as fuel and food prices climbed.

The 0.5 percent increase was the smallest since July and followed a 0.9 percent March gain that was more than double the previous estimate, Commerce Department figures showed in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.6 percent rise. Sales excluding automobiles and gasoline increased 0.2 percent.

The consumer price index increased 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News and following a 0.5 percent advance in March, figures from the Labor Department showed in Washington. Excluding volatile food and energy, the core gauge rose 0.2 percent, also as projected.

“The inflation data was not great, but not too bad,” said Ray Remy, head of fixed income in New York at Daiwa Capital Markets America Inc., one of 20 primary dealers that trade directly with the Fed. “Most people think the economy is showing signs of life, but it’s also showing signs of troubles. It’s very mixed.”

The Fed has held its target rate for overnight lending between banks at zero to 0.25 percent since December 2008. Policy makers affirmed at their April 27 meeting the plan to buy Treasuries through June in an effort to foster faster economic growth and jobs expansion.

The U.S. sold $32 billion in three-year notes, $24 billion in 10-year debt and $16 billion in 30-year bonds this week.

--Editors: Paul Cox, Greg Storey

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net;

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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