Housing Starts in U.S. Increased Less Than Forecast in July
Housing Starts in U.S. Increased Less Than Forecast in July
Tim Boyle/Bloomberg
Work on multifamily homes, such as townhouses and apartment buildings, increased 33 percent to an annual rate of 114,000.
Work on multifamily homes, such as townhouses and apartment buildings, increased 33 percent to an annual rate of 114,000. Photographer: Tim Boyle/Bloomberg
Aug. 17 (Bloomberg) -- Michael Gapen, senior U.S. economist for Barclays Capital, talks with Bloomberg's Julie Hyman about the outlook for the housing market and the possible impact tighter policies governing Fannie Mae and Freddie Mac may have on the housing recovery. Treasury Secretary Timothy F. Geithner and Housing and Urban Development Secretary Shaun Donovan gathered housing-industry stakeholders to seek advice as the administration prepares a housing-finance overhaul to be delivered in January. (Source: Bloomberg)
Aug. 17 (Bloomberg) -- John Silvia, chief economist at Wells Fargo Securities LLC, talks about the U.S. housing market and his outlook for additional economic stimulus from the federal government. Work began on fewer homes than forecast in July and building permits fell to the lowest level in more than a year, indicating little evidence of a rebound in U.S. construction following an expired tax credit. Silvia speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Aug. 17 (Bloomberg) -- Charles Calomiris, professor at Columbia Business School, talks about Fannie Mae and Freddie Mac and his proposals to fix the government-sponsored enterprises. Calomiris speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Aug. 17 (Bloomberg) -- Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC, talks about U.S. housing starts, which rose less than forecast in July. Work began on 546,000 houses at an annual rate last month, Commerce Department figures showed. Building permits dropped 3.1 percent to a 565,000 pace, the lowest level in more than a year. Lebas, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses Fannie Mae and Freddie Mac. (Source: Bloomberg)
Aug. 16 (Bloomberg) -- Michael Feder, chief executive officer of Radar Logic Inc., talks about the outlook for the U.S. housing market. Feder, speaking with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart," also discusses the Obama administration's efforts to prevent foreclosures and plans to overhaul Fannie Mae and Freddie Mac. (Source: Bloomberg)
Work began on fewer homes than forecast in July and building permits fell to the lowest level in more than a year, indicating little evidence of a rebound in U.S. construction following an expired tax credit.
Housing starts totaled 546,000 at an annual rate last month, less than the 560,000 median estimate of economists surveyed by Bloomberg News and up 1.7 percent from June, Commerce Department figures showed today in Washington. Building permits dropped 3.1 percent to a 565,000 pace.
Builders are struggling to drum up demand following the end of government support for the industry, even with mortgage rates at a record low. Mounting foreclosures are adding to inventory and restraining prices at the same time unemployment close to 10 percent hampers the economic recovery.
“The tax credit brought forward some demand, and now we’re in the middle of the payback,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who forecasted a 545,000 pace for housing starts. “We’re in a deep hole right now. There’s no sign that we’re about to climb out of it.”
Economists’ estimates for starts ranged from 525,000 to 615,000, according to 74 projections in the Bloomberg survey. Starts in July followed a revised 537,000 pace in June that was less than the initially reported 549,000 rate.
Building Permits
Building permits, a gauge of future construction, dropped last month to the lowest level since May 2009. Permits for single-family housing, the biggest part of the market, decreased 1.2 percent to a 416,000 pace, the slowest since April 2009.
Stock-index futures held gains and Treasury securities fell after the report. Futures on the Standard & Poor’s 500 Index expiring next month rose 0.7 percent to 1,085.20 at 8:37 a.m. in New York. The 10-year Treasury note declined, pushing up the yield to 2.61 percent from 2.56 percent late yesterday.
Starts were down 7 percent from the same month last year, while permits decreased 3.7 percent.
Construction of single-family houses declined 4.2 percent to a 432,000 rate after the prior month’s 1.7 percent drop.
Work on multifamily homes, such as townhouses and apartment buildings, increased 33 percent to an annual rate of 114,000.
A separate Labor Department report today showed wholesale costs in the U.S. increased in July for the first time in four months. The producer price index increased 0.2 percent following a 0.5 percent drop in June. A measure excluding volatile food and energy costs climbed 0.3 percent, more than projected and the biggest gain since January.
Tax Incentives
The end of a government tax incentive, for which buyers had to sign purchase agreements by April 30 in order to qualify, has caused swings in housing data. The deadline for closings was extended until the end of September. It will take several months for the effect to work its way out of the numbers, economists said.
Three regions of the country had an increase in starts last month, led by a 31 percent jump in Northeast. New construction fell 6.3 percent in the South.
Builders have to contend with a growing supply of existing homes that is driving down home values as foreclosures rise. Home seizures jumped 38 percent in the second quarter from a year earlier, RealtyTrac Inc. said last month, putting lenders on pace to claim more than 1 million properties this year.
Homeowner Help
The Obama administration will offer $1 billion in zero- interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas.
The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to an Aug. 11 statement. The Treasury Department will also provide as much as $2 billion in aid under an existing program for 17 states and the District of Columbia, according to the statement.
Homebuilder sentiment fell in August to its lowest level since March 2009, according to the National Association of Realtors/Wells Fargo confidence index yesterday. The Standard & Poor’s Supercomposite Homebuilding Index has declined 12 percent this year through yesterday compared with a 3.2 percent decrease in the broader S&P 500.
“The next 12 to 24 months will be challenging in the homebuilding industry,” Donald Tomnitz, chief executive officer of D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, said on an Aug. 3 conference call with investors.
Mortgage Rates
While the average rate on a 30-year fixed mortgage fell to a record-low 4.44 percent in the week ended Aug. 12, according to Freddie Mac, a lack of employment growth is a hurdle for the industry.
The Labor Department reported earlier this month that private payrolls rose a less-than-forecast 71,000 in July and total jobs fell by 131,000, the second job decline this year. Economists surveyed by Bloomberg forecast unemployment will end the year at 9.5 percent, unchanged from the rate in July.
“The pace of recovery in output and employment has slowed in recent months,” central bank officials said in a statement following their Aug. 10 meeting. The “economic recovery is likely to be more modest in the near term than had been anticipated.”
Fed policy makers, who renewed a pledge to hold interest rates near zero, said they will maintain their holdings of securities to prevent money from being drained out of the financial system, their first attempt to bolster the economy in more than a year.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Rate this Page