By Courtney Schlisserman and Bob Willis – // Sep 21, 2010 8:22 AM PT Propeller

 

Housing Starts in U.S. Increased More Than Forecast

Builders broke ground on 598,000 homes at an annual rate, up 10.5 percent and the most since April, following a 541,000 pace in July, the Commerce Department said in Washington. Photographer: Jim R. Bounds/Bloomberg

Sept. 21 (Bloomberg) — David Semmens, an economist at Standard Chartered Bank, talks about the outlook for the U.S. housing market and the need to maintain government support of the mortgage market. Semmens speaks with Deirdre Bolton and Jon Erlichman on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

Sept. 21 (Bloomberg) — Housing starts in the U.S. increased more than forecast in August, a signal the industry is stabilizing. Builders broke ground on 598,000 homes at an annual rate, up 10.5 percent and the most since April, following a 541,000 pace in July, the Commerce Department said today in Washington. Bloomberg’s Betty Liu and Michael McKee report. (Source: Bloomberg)

Sept. 20 (Bloomberg) — Bernie Markstein, senior economist and vice president for economic forecasting and analysis at the National Association of Home Builders, talks with Bloomberg’s Melissa Long about the group’s survey showing confidence among U.S. homebuilders held at the lowest level in more than a year. The National Association of Home Builders/Wells Fargo confidence index was unchanged at 13, matching the August reading as the lowest since March 2009, data from the Washington-based group showed today. (Source: Bloomberg)

Housing starts in the U.S. increased more than forecast in August, outstripping a gain in building permits that signals residential construction will stay close to record lows.

Builders began work on 598,000 homes at an annual rate, up 10.5 percent and the most since April, the Commerce Department said today in Washington. Economists surveyed by Bloomberg News forecast a 550,000 pace. Permits, an indicator of future activity, were issued at a 569,000 rate.

Builders took out fewer applications to start single-family homes for a fifth consecutive month, signaling a jobless rate at or above 9.5 percent for the past 13 months is hurting companies such as Hovnanian Enterprises Inc. A distressed housing market is among reasons Federal Reserve policy makers meeting today will consider whether new measures are needed to boost growth.

“The housing market has found a bottom, and we’re bouncing along here,” said Thomas Simons, an economist at Jefferies Group Inc. in New York. “The market is challenged by supply, and until that is cleared out, it will be tough for the homebuilders. We also need additional job creation.”

Estimates for August starts in the Bloomberg survey of 74 economists ranged from 505,000 to 600,000 after a previously reported 546,000 a month earlier.

Builder Shares

Stocks fluctuated as declines in technology and consumer- staples companies offset a rally in homebuilders. The Standard & Poor’s 500 Index fell 0.2 percent to 1,140.60 at 11:20 a.m. in New York. The S&P Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and Lennar Corp., rose 0.9 percent. The yield on the 10-year Treasury note fell to 2.67 percent from 2.70 percent late yesterday.

The gain in starts was led by a 32 percent jump in construction of multifamily units, which is often volatile. Work began on 4.3 percent more single-family houses, which accounted for 73 percent of the industry.

Similarly, the 1.8 percent increase in building permits last month reflected a gain among multifamily units, which include townhouses and apartment building. Applications for single-family projects dropped to the lowest level since April 2009.

“Even though single-family starts moved in the right direction, there is still weakness evident in the single-family data,” Daniel Silver, an economist at JPMorgan Chase & Co. in New York, said in a note to clients. “The level of starts relative to permits indicates that the growth in housing starts may not be sustained.”

Regional Breakdown

Three of four regions of the country had an increase in starts last month, led by a 34 percent surge in the West and a 22 percent gain in the Midwest.

The Fed’s policy-making Federal Open Market Committee is scheduled to announce its decision on interest rates today at about 2:15 p.m. The benchmark interest rate has been in a range of zero to 0.25 percent since December 2008.

The central bank said in its Beige Book survey of regional Fed banks earlier this month that there were “widespread signs of a deceleration” in the economy from mid-July through the end of August. Most areas of the U.S. reported “very low or declining home sales.”

Sales of new houses dropped in July to the lowest level in records dating back to 1963, figures from the Commerce Department showed last month. The government is scheduled to release August sales data on Sept. 24.

Tax Credit

Demand plunged after the deadline for signing contracts and becoming eligible for a government homebuyer credit worth as much as $8,000 lapsed on April 30. The tax incentive provided temporary relief for the industry that precipitated the recession.

Rising foreclosures depress prices and mean homes stay on the market longer, hurting builders. Home seizures reached a record in August for the third time in five months, RealtyTrac Inc. said Sept. 16.

A lack of jobs is preventing some buyers from making mortgage payments. The 13 months of unemployment at 9.5 percent or higher matches the period from mid 1982 to mid 1983 as the longest span of elevated joblessness since monthly records began in 1948.

Payrolls dropped in 36 states in August, indicating the labor market will take time to rebound, figures from the Labor Department also showed. Employers in Michigan cut 50,300 jobs last month, the biggest drop since January 2009. Texas and California rounded out the three states with the biggest job losses. Joblessness climbed in 27 states, with Nevada reaching a record 14.4 percent rate, the highest in the nation.

Obama Plans

The Obama administration has said it plans to announce proposals in the next few weeks for an emergency loan program for the unemployed to avert default, and a government mortgage refinancing effort to lower monthly mortgage payments to avoid foreclosures.

The end of the homebuyer credit, joblessness and sagging consumer confidence prompted a decline in orders at Hovnanian, the largest homebuilder in New Jersey said on Sept 1. The company said its net orders dropped 37 percent in the quarter ended July 31 from a year earlier.

“Job creation is the key to a housing recovery, which makes it difficult to predict how improvements in the economy and housing market play out,” Chief Executive Officer Ara Hovnanian said in a statement.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net; 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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