U.S. Home Starts Probably Rose in November

Builders probably began work on more homes in November, a sign the market may be stabilizing heading into 2012, economists said before a report today.

Starts increased 1.1 percent to a 10-month high of 635,000 annual rate last month, according to the median estimate of 79 economists surveyed by Bloomberg News. Permits, a proxy for future construction, may have fallen from October’s 19-month high.

Some prospective buyers are being lured into the market for new homes as borrowing costs hover near a record low, prices fall and banks become more willing to lend. At the same time, builders face competition from existing houses as another wave of foreclosures throws more marked-down properties on the market.

“Housing demand should improve gradually early in 2012 in response to an improving labor market and a better lending environment,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “A considerable excess of existing homes for sale will persist as distressed properties enter the market, but that threat to new-home construction may be lessening.”

The homebuilding report is due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 600,000 to 655,000.

Builders began work on 586,900 homes last year, the second- fewest on record. Home construction totaled 554,000 units in 2009, the lowest since data-keeping began in 1959.

Fewer Permits

Permits may have slipped to a 635,000 annual rate in November, from 644,000 the prior month, according to the Bloomberg survey median.

Construction of single-family homes will probably post a new low this year at around 419,100, about 11 percent less than in 2010, according to Bloomberg News calculations. The industry is being buoyed by a projected 45 percent jump in work on multifamily units as more homeowners who lose their homes to foreclosure become renters.

Builders have less incentive to start projects for single- family homes as more foreclosures loom on the horizon. Sales of previously owned homes, which now make up about 94 percent of the market, increased 1.4 percent in October, according to figures from the National Association of Realtors.

Investors remain concerned about the prospects for homebuilders. The Standard & Poor’s Supercomposite Homebuilder Index has slumped 11 percent since the end of June through yesterday, compared with a 8.7 percent drop in the broader S&P 500 Index.

Obama Initiatives

The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original program helped less than a quarter of the people targeted to lock in lower mortgage rates.

Federal Reserve policy makers reiterated at a meeting this month that they will 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 contributing to signs of improvement in the housing market. A report yesterday showed the National Association of Home Builders/Wells Fargo index of builder confidence rose in December for a third straight month, to 21, the highest level since May 2010. Readings below 50 mean more respondents said conditions were poor.

“November is a time that historically sales slow down,” Larry Sorsby, chief financial officer at Hovnanian Enterprises Inc. (HOV), said in a Dec. 15 call with analysts. “And this year we’ve not seen as dramatic a slowdown as we have in recent prior years. The market feels a little bit better than we would have expected.”

                        Bloomberg Survey

==============================================
                           Housing  Building
                            Starts   Permits
                            ,000’s   ,000’s
==============================================

Date of Release              12/20    12/20
Observation Period            Nov.     Nov.
----------------------------------------------
Median                         635      635
Average                        633      636
High Forecast                  655      668
Low Forecast                   600      610
Number of Participants          79       54
Previous                       628      644
----------------------------------------------
4CAST Ltd.                     627      625
ABN Amro Inc.                  629     ---
Action Economics               610      615
Aletti Gestielle               635      640
Ameriprise Financial Inc       635      640
Banca Aletti & C spa           615      643
Banesto                        628      635
Bank of Tokyo- Mitsubishi      650      640
Bantleon Bank AG               640      640
Barclays Capital               630     ---
BBVA                           620      618
BMO Capital Markets            640      635
BNP Paribas                    640     ---
BofA Merrill Lynch Resear      650      625
Briefing.com                   600      625
Capital Economics              640     ---
CIBC World Markets             635      633
Citi                           640      630
ClearView Economics            600      610
Comerica Inc                   625     ---
Commerzbank AG                 635      635
Credit Agricole CIB            632      635
Credit Suisse                  640     ---
Daiwa Securities America       610     ---
DekaBank                       640      640
Desjardins Group               640      610
Deutsche Bank Securities       630      630
Deutsche Postbank AG           635     ---
Exane                          640     ---
First Trust Advisors           634     ---
FTN Financial                  635      657
Goldman, Sachs & Co.           634     ---
Helaba                         635      625
High Frequency Economics       650      625
HSBC Markets                   620      625
Hugh Johnson Advisors          640     ---
IDEAglobal                     620      635
IHS Global Insight             635      624
Informa Global Markets         640      630
ING Financial Markets          648      622
Insight Economics              625     ---
Intesa-SanPaulo                635      635
J.P. Morgan Chase              645      645
Janney Montgomery Scott L      635      645
Jefferies & Co.                615      620
Landesbank Berlin              615      630
Landesbank BW                  650      635
Market Securities              645     ---
MET Capital Advisors           627     ---
Moody’s Analytics              635      650
Morgan Keegan & Co.            653      665
Morgan Stanley & Co.           630     ---
National Bank Financial        635      645
Natixis                        637     ---
Nomura Securities Intl.        653      664
Nord/LB                        630      640
OSK Group/DMG                  620     ---
O’Sullivan                     650      645
Parthenon Group                638      668
Pierpont Securities LLC        630     ---
PineBridge Investments         631     ---
PNC Bank                       625     ---
Prestige Economics             605      625
Raymond James                  635      630
RBC Capital Markets            622     ---
RBS Securities Inc.            640     ---
Scotia Capital                 640      650
SMBC Nikko Securities          645      620
Societe Generale               655      665
State Street Global Marke      641      648
Stone & McCarthy Research      635      630
TD Securities                  635      635
UBS                            650     ---
Union Investment               630      630
University of Maryland         630      640
Wells Fargo & Co.              618     ---
WestLB AG                      620      625
Westpac Banking Co.            638      644
Wrightson ICAP                 620      645
================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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