PREVIEW-US home prices to eke out small June gain

* What: Standard & Poor’s/Case-Shiller Home Price Indexes

* When: Tuesday, Aug. 31 at 9 a.m. ET (1400 GMT)

* Economists’ median forecasts for 20-city index:

+0.2 pct seasonally adjusted June

+3.9 pct year-over-year in June

REUTERS FORECASTS

U.S. home prices likely eked out a small gain in June, but
a rise would represent the final tail-winds of the homebuyer
tax credit that ended in April rather than housing market
improvement, economists said.

Sales have failed to sustain traction in the wake of the
federal incentive that drew summer sales forward into spring
months.

Tepid home buying despite record low mortgage rates,
combined with the high hurdle of foreclosure sales, will keep
weighing on home prices.

The Standard & Poor’s/Case-Shiller 20-city composite home
price index likely rose 0.2 percent in June after a 0.5 percent
increase in May, seasonally adjusted, according to a Reuters
survey of 18 economists.

Forecasts ranged from a 0.6 percent drop to a 0.5 percent
rise.

On an annual basis, the 3.9 percent increase that is
expected for June would be a slowing from the 4.6 percent May
rise, based on a survey of 29 economists. Estimates spanned
between gains of 2.5 percent and 4.9 percent.

S&P, which publishes the indexes, will also report on
unadjusted prices in June as well as national home prices for
the second quarter. On an unadjusted basis, prices rose 1.3
percent in May and fell 1.3 percent in the first quarter.

FACTORS TO WATCH

If prices are flat or higher in June, based on the
S&P/Case-Shiller series, it would likely be because the indexes
are based on three-month moving averages and may be slower to
adjust, several Wall Street firms noted.

HSBC forecasts a 0.7 percent rise in the national index for
the second quarter, seasonally adjusted, after a 1.3 percent
drop in the first quarter.

“Measures of U.S. house prices could be set to soften as
the data begin to capture more of the transactions that
occurred after the homebuyer tax credit expired at the end of
April,” HSBC wrote in its weekly Economic Diary.

Bank of America-Merrill Lynch forecasts a 0.5 percent
seasonally adjusted drop in the 20-city monthly index,
predicting that “decline in June will prove to be the beginning
of a downward trend in home prices.”

MARKET REACTION

There is little illusion that home prices can accelerate
much in the near term.

July sales of existing homes sank to the slowest pace in 15
years and new home sales dropped to the slowest pace on record,
the latest evidence that tight lending and the loss of home
equity have stifled buying and mobility.

Unemployment and foreclosures help make housing a ship that
will be painfully slow to turn around.

Market reaction will likely be tempered by any surprisingly
large home price rise, as the consensus is that price
appreciation will be fleeting at least through this year.
Unexpected weakness in June or second quarter home prices could
prop bond prices, fostering the drive toward safe assets.

(Reporting by Lynn Adler; polling by Bangalore Polling
Unit)

PREVIEW-US home prices to eke out small June gain