A gain in March housing starts failed to make up for ground lost the prior month, as U.S. home builders continue to struggle almost two years into the economic recovery.
Work began on 549,000 houses at an annual pace, up 7.2 percent from the prior month and exceeding the 520,000 median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed today in Washington. Starts fell 19 percent in February to the lowest level in almost two years.
Housing, which pushed the economy into the recession, remains the weak link in the recovery and continues to weigh on consumer spending as home prices fall. The prospect of more foreclosures and joblessness forecast to average 8.7 percent this year means any recovery in housing may take time to develop.
“We remain at very low levels,” said Richard DeKaser, an economist at Parthenon Group in Boston, who correctly forecast last month’s increase. “The best description is bumping along the bottom. The underlying trend is one of stability or modest improvement since we hit our low point a couple of years ago.”
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in June rose 0.2 percent to 1,303.8 at 8:34 a.m. in New York. Treasury securities were little changed.
Housing starts estimates ranged from 475,000 to 620,000 in the Bloomberg News survey of 77 economists.
The Commerce Department revised February’s total to a 512,000 pace, up from a previously estimated 479,000. It was still the lowest since a 477,000 pace in April 2009 that was the weakest on record.
The revisions plus an increase in construction applications made the figures look less dire. Building permits, a proxy for future construction, rose 11 percent to a 594,000 pace. They were projected to rise 1.1 percent to a 540,000 annual pace.
Construction of single-family houses increased 7.7 percent to a 422,000 rate in March from the prior month. Work on multifamily homes, such as townhouses and apartments, increased 5.8 percent to an annual rate of 127,000.
Starts climbed in three of four regions, led by a 32 percent jump in the Midwest. They fell 3.3 percent in the South.
Confidence among U.S. homebuilders fell in April, led by a decline in the outlook for sales. The National Association of Home Builders/Wells Fargo sentiment index declined to 16 this month from 17 in March, data from the Washington-based group showed yesterday. A measure of sales expectations for the next six months dropped to the lowest level since October.
New-home sales fell to a record-low annual rate of 250,000 in February, the Commerce Department reported on March 23. The median price dropped to the lowest level since December 2003.
Sales of existing homes, which make up more than 90 percent of the market, rose 2.5 percent to a 5 million annual pace in March, economists surveyed by Bloomberg forecast the National Association of Realtors may report tomorrow. Existing home sales have been gaining market share from new homes due to increased cash purchases of distressed homes.
Lending rates are rising as the broader economy recovers. The average rate on a 30-year fixed loan increased to 4.98 percent the week ended April 8, the highest since Feb. 18, according to the Mortgage Bankers Association. Borrowing costs have climbed since reaching 4.21 percent in October, the lowest since the group’s records began in 1990.
Even with home seizures currently delayed as banks and state attorneys general struggle to agree on new guidelines, foreclosure filings will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac Inc. said Jan. 13.
CoreLogic Inc. last month estimated about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the 3.5 million existing homes already on the market.
“Activity in the housing market continued to be depressed, held down by the large inventory of foreclosed or distressed properties on the market and by weak demand,” Federal Reserve policy makers said in minutes of their March 15 policy meeting released April 5.
Homebuilders aren’t optimistic. KB Home, the Los Angeles- based homebuilder that targets first-time buyers, this month reported a bigger-than-expected loss for the quarter ended Feb. 28 as orders plunged.
“Today’s consumers remain very cautious, whether they have concerns about home prices falling further, their job status, their ability to qualify for a loan, or general confidence in the economy,” President and Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5. “A sustained, broad-based housing recovery will not occur until we start to experience material job creation.”
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