Builders Probably Started Work on Fewer Homes in October Amid Low Values
Builders in U.S. Probably Started Work on Fewer Homes
Daniel Acker/Bloomberg
A stack of oriented strand board (OSB) sheathing is delivered to a home under construction in Bloomington, Illinois, U.S.
A stack of oriented strand board (OSB) sheathing is delivered to a home under construction in Bloomington, Illinois, U.S. Photographer: Daniel Acker/Bloomberg
Nov. 14 (Bloomberg) -- Jennifer Bridwell, head of alternatives product development at Pacific Investment Management Co., talks about the U.S. housing market outlook and investing in distressed securities. She speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Builders probably began work on fewer homes in October, a sign housing will remain a laggard in the third year of the U.S. recovery, economists said before a report today.
Starts fell 7.3 percent to a 610,000 annual rate in October, according to the median estimate of 82 economists surveyed by Bloomberg News. Manufacturing in the Philadelphia area expanded for a second month, other data may show.
Builders like D.R. Horton Inc. and Beazer Homes USA Inc. may be hesitant to begin projects as foreclosures push down property values. Unemployment at 9 percent and falling home prices have also kept buyers on the sidelines, helping explain why the Federal Reserve and Obama administration are looking for ways to jumpstart housing.
“We’re still seeing tough issues throughout the housing market,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “Foreclosures remain a challenge. There will be a very gradual improvement. The industry still needs help from policy makers.”
The homebuilding report is due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 575,000 to 640,000. In September, demand for apartments and condominiums helped boost starts to a 658,000 pace, the fastest since April 2010.
The median projection for October compares with last year’s tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959.
Building Permits
Permits may have climbed to a 603,000 annual rate, from 589,000 the prior month, according to the Bloomberg survey median.
The Federal Reserve Bank of Philadelphia may report at 10 a.m. that its general economic index was little changed at 9 in November from 8.7 the previous month, according to the Bloomberg survey median. Readings greater than zero indicate expansion.
The report may add to evidence that factories are helping the world’s largest economy weather financial-market disruption caused by the debt crisis in Europe. Figures from the Fed yesterday showed industrial production climbed 0.7 percent in October, more than forecast, boosted by demand for cars and business equipment.
Builders, in contrast, have less incentive to start projects as demand remains uneven. Purchases of new houses rose 5.7 percent in September as discounted prices lured buyers in some regions. Sales of previously owned homes, which make up about 94 percent of the market, fell 3 percent.
D.R. Horton, the second-largest homebuilder by revenue, reported quarterly earnings that missed analyst estimates. The Fort Worth, Texas-based company has been lowering costs and shifting its focus to move-up buyers as demand remains weak.
“We’re still a bit cautious about the overall environment,” Chief Financial Officer William Wheat said on a conference call with investors on Nov. 11. “It is still a challenging homebuilding environment out there.”
Beazer Homes, an Atlanta-based homebuilder, this week reported a loss in the quarter ended Sept. 30, and cited “many challenges facing the industry.”
Even as concerns about Europe weigh on the U.S. economy, investors are more concerned about prospects for homebuilders. The Standard & Poor’s Supercomposite Homebuilder Index has slumped 12 percent since the end of 2010 through yesterday, compared with a 1.6 percent drop in the broader S&P 500 Index. (SPX)
President Barack Obama has been promoting an initiative by the Federal Housing Finance Agency to let qualified homeowners refinance mortgages regardless of how much their houses have lost in value. The Home Affordable Refinance Program, or HARP, will eliminate some fees, trim others and waive some risk for lenders.
Until 2013
The Fed’s efforts include a commitment to keep the benchmark interest rate near zero until at least 2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.
Some policy efforts may be starting to bear fruit. A report yesterday showed the National Association of Home Builders/Wells Fargo index of builder confidence rose to 20 in November, the highest level since May 2010. Readings below 50 mean more respondents said conditions were poor.
Also today at 8:30 a.m., Labor Department figures may show initial claims for jobless benefits rose to 395,000 last week from 390,000 the prior week, according to the Bloomberg survey median.
Bloomberg Survey
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Housing Building Initial Philly
Starts Permits Claims Fed
,000’s ,000’s ,000’s Index
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Date of Release 11/17 11/17 11/17 11/17
Observation Period Oct. Oct. 12-Nov Nov.
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Median 610 603 395 9.0
Average 609 603 395 7.9
High Forecast 640 630 405 15.0
Low Forecast 575 577 382 -1.0
Number of Participants 82 55 44 59
Previous 658 589 390 8.7
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4CAST 610 600 402 8.0
ABN Amro 618 --- 395 9.0
Action Economics 605 605 395 4.0
Aletti Gestielle 600 600 --- 2.5
Ameriprise Financial 615 595 --- 10.0
Banca Aletti 593 603 390 8.0
Banesto 620 600 --- 9.7
Bank of Tokyo- Mitsubishi 640 610 400 10.0
Barclays Capital 615 --- 390 10.0
Bayerische Landesbank --- --- --- 9.0
BBVA 630 590 395 5.0
BMO Capital Markets 600 600 --- ---
BNP Paribas 590 --- 395 6.0
BofA Merrill Lynch 605 600 395 11.0
Briefing.com 575 600 400 5.0
Capital Economics 600 --- --- 10.0
CIBC World Markets 620 590 --- ---
Citi 625 595 390 6.0
ClearView Economics 610 610 --- 2.0
Comerica 615 --- --- ---
Commerzbank AG 600 600 385 10.0
Credit Agricole CIB 610 605 --- 10.0
Credit Suisse 580 580 385 ---
Daiwa Securities America 620 --- --- ---
Danske Bank 600 --- --- 8.0
DekaBank 600 600 --- 6.0
Desjardins Group 590 600 395 6.0
Deutsche Bank Securities 625 600 390 15.0
Deutsche Postbank AG 610 --- --- ---
DZ Bank 632 600 --- 9.5
Exane 610 --- --- 5.0
Fact & Opinion Economics 630 --- 393 11.0
First Trust Advisors 605 --- 397 11.1
FTN Financial 624 577 --- ---
Goldman, Sachs & Co. 606 --- --- 5.0
Helaba 620 590 400 6.0
High Frequency Economics 630 600 400 8.7
HSBC Markets 620 610 395 8.0
Hugh Johnson Advisors 635 --- --- 10.0
IDEAglobal 635 600 395 10.0
IHS Global Insight 612 615 --- ---
Informa Global Markets 610 595 400 9.0
ING Financial Markets 606 605 395 11.5
Insight Economics 600 --- 400 7.5
Intesa-SanPaulo 610 605 --- 5.0
J.P. Morgan Chase 605 610 395 10.0
Janney Montgomery Scott 604 577 --- ---
Jefferies & Co. 600 605 --- ---
Landesbank Berlin 610 620 405 5.0
Landesbank BW 610 620 --- 12.0
Maria Fiorini Ramirez 595 --- 395 ---
Market Securities 598 --- --- ---
MET Capital Advisors 575 --- --- ---
Mizuho Securities 592 --- 400 9.0
Moody’s Analytics 605 610 400 -1.0
Morgan Keegan & Co. 619 606 --- ---
Morgan Stanley & Co. 625 --- 390 ---
National Bank Financial 615 605 --- ---
Natixis 630 --- --- ---
Nomura Securities 601 590 --- 5.6
Nord/LB 610 600 --- 10.0
OSK Group/DMG 600 --- --- ---
Parthenon Group 623 613 --- 0.0
Pierpont Securities 600 --- 399 ---
PineBridge Investments 579 --- 400 11.0
PNC Bank 605 --- --- ---
Prestige Economics 605 625 --- ---
Raiffeisenbank International 610 610 --- ---
Raymond James 600 605 395 8.0
RBC Capital Markets 596 --- 398 5.0
Scotia Capital 600 600 390 9.0
Societe Generale 640 630 382 14.3
Standard Chartered 605 603 385 10.0
State Street Global Markets 602 603 394 9.6
Stone & McCarthy Research 582 600 388 2.2
TD Securities 625 610 390 10.0
UBS 615 --- 400 10.0
Union Investment 620 600 --- ---
University of Maryland 615 605 400 7.0
Wells Fargo & Co. 603 --- --- ---
WestLB AG 610 605 --- 11.0
Westpac Banking Co. 586 604 400 2.0
Wrightson ICAP 605 610 395 10.0
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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