U.S. Housing Starts Fell in February to Lowest Since April 2009
A carpenter seals an aluminum drip edge outside a home under construction in Geneseo, Illinois. Photographer: Daniel Acker/Bloomberg
March 16 (Bloomberg) -- Housing starts in the U.S. declined more than forecast in February, marking the slowest pace since April 2009. New home construction fell 22.5 percent to a 479,000 annual rate, according to Commerce Department figures released today in Washington. Building permits, a proxy for future construction, fell 8.2 percent to a 517,000 annual pace. The producer-price index climbed 1.6 percent last month, the most since June 2009, Labor Department figures showed. Mike McKee reports with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
March 15 (Bloomberg) -- Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller home-price index, talks about the impact a wind-down of Fannie Mae and Freddie Mac may have on the U.S. housing market. The Obama administration has proposed phasing out the two mortgage companies have required a combined $154 billion in Treasury funds since they were placed under U.S. conservatorship more than two years ago. Shiller speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
Housing starts in the U.S. declined more than forecast in February to the slowest pace since April 2009 and building permits slumped to a record low, signs the housing market recovery is limping along as the rest of the economy improves.
Beginning home construction fell 22.5 percent to a 479,000 annual rate, with declines in all regions, Commerce Department figures showed today in Washington. The decrease from January was the biggest since March 1984. The median forecast in a Bloomberg News survey called for a 566,000 rate. Building permits, a proxy for future construction, fell 8.2 percent to a 517,000 pace.
Foreclosed homes that have driven down prices and added to inventories, along with limited job growth, are restraining new construction. Federal Reserve policy makers said yesterday the housing market “continues to be depressed,” as they maintained plans to purchase Treasury securities to boost economic growth.
“At this point new homes are likely to continue to lose to existing homes because distressed properties pose a better bargain for buyers,” said Millan Mulraine, senior U.S. strategist at TD Securities in New York. “We’re not seeing a strong rebound in the horizon because permit approval is just marginally above starts.”
Stock-index futures erased gains after the report. Contracts on the Standard & Poor’s 500 Index expiring in June dropped less than 0.1 percent to 1,274.8 at 8:33 a.m. in New York. Treasuries were little changed with the yield on the benchmark 10-year note at 3.30 percent.
Producer Prices
Wholesale costs in the U.S. rose more than forecast in February, led by the biggest gain in food since 1974 and a surge in energy prices, Labor Department figures showed today. The producer-price index climbed 1.6 percent, the most since June 2009. Core producer prices, which exclude food and fuel, rose 0.2 percent, less than half the 0.5 percent gain in January.
Housing starts estimates ranged from 537,000 to 638,000 in the Bloomberg News survey of 74 economists. January’s pace was revised to 618,000 from a previous estimate of 596,000.
Permits declined by 28 percent in the Northeast to the lowest on record and by 14 percent to an all-time low in the West.
Construction of single-family houses decreased 12 percent to a 375,000 rate in February, the slowest since March 2009, from the prior month. Work on multifamily homes, such as townhouses and apartments, slumped 46 percent to an annual rate of 104,000.
By Region
Starts in fell in all four regions, led by a 49 percent drop in the Midwest to a record low. Starts declined 38 percent in the Northeast, 28 percent in the West and 6.3 percent in the South.
Fed Chairman Ben S. Bernanke said during his testimony to Congress this month that the housing sector “remains weak” even with “some grounds for optimism” in the economy.
“Many potential home buyers are finding mortgages difficult to obtain and are also worried about additional declines in house prices,” Bernanke told lawmakers March 2.
Until more people want homes, “there’s no demand for construction to build houses and so the construction industry is quite reduced,” Bernanke said. There were 188,000 new houses on the market at the end of January, the fewest since December 1967, Commerce Department figures showed Feb. 24.
Fed policy makers, after their second meeting of the year yesterday, reaffirmed their plans to buy $600 billion of Treasuries through June to “promote a stronger recovery.”
Foreclosure Forecast
Foreclosure filings will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac said Jan. 13. The Irvine, California-based data seller said foreclosures dropped in February to the lowest level in three years as lenders under legal scrutiny struggled to process a backlog of defaults and put new systems in place for home seizures.
“We still see this shadow supply of housing out there from foreclosures and distressed sales that really needs to get absorbed before you see a healthy new-home building market,” said Scott Anderson, a senior economist at Wells Fargo Securities LLC in Minneapolis.
A filing surfeit later could add to the surplus of unsold properties and lead to more declines in home values. Residential real-estate prices dropped in the 12 months to December by the most in a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 2.4 percent, the biggest year- over-year decrease since December 2009, the group said Feb. 22.
Job Growth
For housing, employment “is the most important part today or biggest impediment,” said Larry T. Nicholson, chief executive officer of Ryland Group Inc. (RYL), a Calabasas, California-based homebuilder catering to first-time buyers.
Whether potential buyers “have a job and they’re going to keep their job or whether their hopes of employment are out there is still the biggest challenge for us today,” Nicholson said at an investor conference March 8 in Orlando, Florida.
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