Homebuilding Probably Increased in U.S. to Three-Month High

Photographer: Daniel Acker/Bloomberg

A contractor levels pea gravel in the basement of a home being built by Blume Construction in East Peoria, Illinois, U.S. Close

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Photographer: Daniel Acker/Bloomberg

A contractor levels pea gravel in the basement of a home being built by Blume Construction in East Peoria, Illinois, U.S.

Homebuilding in the U.S. probably climbed to a three-month high in February, another sign the residential real-estate market is stabilizing, economists said before a report today.

Housing starts increased to a 700,000 annual rate last month from a 699,000 pace in January, according to the median estimate of 80 economists surveyed by Bloomberg News. It would be the strongest reading since November’s three-year high of 702,000. The same report may show that building permits, a proxy for future construction, climbed.

Falling home prices and mortgage rates close to all-time lows are helping drive record housing affordability, benefiting builders like Toll Brothers Inc. (TOL) Nonetheless, the real estate market faces headwinds from distressed properties and more foreclosures that could push values down further.

“We have seen some improvement from extremely low levels,” said Sean Incremona, a senior economist at 4Cast Inc. in New York. “There seems to some mild progress there.”

The housing starts figures are due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 650,000 to 775,000.

Today’s report may also show building permits climbed by 0.6 percent to a 686,000 annual rate, the fastest pace since March 2010, according to the survey median.

Milder-than-normal weather may have also played a role in propelling construction last month. The average temperature was 38.2 degrees Fahrenheit (3.4 Celsius), 3.6 degrees warmer than the 20th century average and the 17th warmest February in 118 years.

Sentiment Improving

Optimism among homebuilders has been improving in recent months. The National Association of Home Builders/Wells Fargo index of builder confidence held in March at the highest level since June 2007 as sales expectations climbed for a sixth month, figures showed yesterday.

“All the economic signs seem to be positive in terms of consumer confidence, interest rates, unemployment levels,” Martin Connor, chief financial officer at Toll Brothers, said March 5 at an investors’ conference in Orlando, Florida.

The average rate on a 30-year fixed mortgage reached an all-time low of 3.87 percent in February, according to data from Freddie Mac.

A measure of housing affordability a month earlier climbed to 206.1, according to the National Association of Realtors. A value of 100 means a family earning the national median income can afford a median-priced property at current mortgage rates.

Investors also are upbeat about prospects. The Standard & Poor’s Supercomposite Homebuilding Index (S15HOME) has advanced 28 percent since the end of last year, more than twice the 12 percent gain in the broader S&P 500.

Federal Reserve policy makers last week said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist and aimed at bringing down borrowing costs like mortgage rates.


                        Bloomberg Survey

================================================================
                           Housing  Housing Building Building
                            Starts   Starts  Permits  Permits
                            ,000’s     MOM%   ,000’s     MOM%
================================================================
Date of Release              03/20    03/20    03/20    03/20
Observation Period            Feb.     Feb.     Feb.     Feb.
----------------------------------------------------------------
Median                         700     0.1%      686     0.6%
Average                        701     0.3%      690     1.2%
High Forecast                  775    10.9%      735     7.8%
Low Forecast                   650    -7.0%      665    -2.5%
Number of Participants          80       80       55       55
Previous                       699     1.5%      682     1.6%
----------------------------------------------------------------
4CAST                          705     0.9%      665    -2.5%
ABN Amro                       699     0.0%     ---
Action Economics               680    -2.7%      680    -0.3%
Aletti Gestielle               700     0.1%      685     0.4%
Ameriprise Financial           700     0.1%      690     1.2%
Analytical Synthesis           689    -1.4%      695     1.9%
Banca Aletti                   692    -1.0%      677    -0.7%
Banesto                        700     0.1%      693     1.6%
Barclays Capital               720     3.0%     ---
BBVA                           697    -0.3%      678    -0.6%
BMO Capital Markets            697    -0.3%      685     0.4%
BNP Paribas                    685    -2.0%     ---
BofA Merrill Lynch             710     1.6%      700     2.6%
Briefing.com                   715     2.3%      680    -0.3%
Capital Economics              710     1.6%     ---
CIBC World Markets             685    -2.0%      700     2.6%
Citi                           690    -1.3%      685     0.4%
Comerica                       680    -2.7%     ---
Commerzbank AG                 685    -2.0%      685     0.4%
Credit Agricole CIB            692    -1.0%      685     0.4%
Credit Suisse                  710     1.6%      700     2.6%
Daiwa Securities America       705     0.9%     ---
Danske Bank                    699     0.0%      682     0.0%
DekaBank                       685    -2.0%      690     1.2%
Desjardins Group               690    -1.3%      700     2.6%
Deutsche Bank Securities       725     3.7%      695     1.9%
Deutsche Postbank AG           700     0.1%     ---
Exane                          690    -1.3%     ---
Fact & Opinion Economics       690    -1.3%     ---
First Trust Advisors           695    -0.6%     ---
FTN Financial                  710     1.6%      700     2.6%
Goldman, Sachs & Co.           734     5.0%     ---
Helaba                         720     3.0%      680    -0.3%
High Frequency Economics       700     0.1%      680    -0.3%
HSBC Markets                   710     1.6%      715     4.8%
Hugh Johnson Advisors          700     0.1%     ---
IDEAglobal                     690    -1.3%      685     0.4%
IHS Global Insight             684    -2.2%      697     2.2%
Informa Global Markets         685    -2.0%      680    -0.3%
ING Financial Markets          695    -0.6%      675    -1.0%
Insight Economics              700     0.1%     ---
Intesa Sanpaulo                685    -2.0%      685     0.4%
J.P. Morgan Chase              685    -2.0%      690     1.2%
Janney Montgomery Scott        726     3.9%      701     2.8%
Jefferies & Co.                700     0.1%      685     0.4%
Landesbank Berlin              650    -7.0%      680    -0.3%
Landesbank BW                  710     1.6%      690     1.2%
Market Securities              715     2.3%     ---
MET Capital Advisors           704     0.7%     ---      ---
Moody’s Analytics              712     1.9%      715     4.8%
Morgan Keegan & Co.            703     0.6%      683     0.2%
Morgan Stanley & Co.           710     1.6%     ---
National Bank Financial        700     0.1%      690     1.2%
Natixis                        700     0.1%     ---
Nomura Securities              706     1.0%      703     3.1%
Nord/LB                        690    -1.3%      680    -0.3%
OSK Group/DMG                  700     0.1%     ---
O’Sullivan                     710     1.6%      690     1.2%
Parthenon Group                716     2.4%      695     1.9%
Pierpont Securities            720     3.0%     ---
PineBridge Investments         734     5.0%     ---
PNC Bank                       720     3.0%     ---
Raiffeisenbank International   740     5.9%      730     7.0%
Raymond James                  710     1.6%      700     2.6%
RBC Capital Markets            685    -2.0%     ---
RBS Securities                 690    -1.3%     ---
Scotia Capital                 700     0.1%     ---
SMBC Nikko Securities          700     0.1%      690     1.2%
Societe Generale               775    10.9%      735     7.8%
Standard & Poor’s              680    -2.7%      675    -1.0%
Standard Chartered             705     0.9%      690     1.2%
Stone & McCarthy Research      690    -1.3%      680    -0.3%
TD Securities                  715     2.3%      705     3.4%
UBS                            680    -2.7%      680    -0.3%
Union Investment               685    -2.0%      685     0.4%
University of Maryland         690    -1.3%      680    -0.3%
Wells Fargo & Co.              710     1.6%     ---
WestLB AG                      697    -0.3%      686     0.6%
Westpac Banking Co.            713     2.0%      686     0.6%
Wrightson ICAP                 700     0.1%      690     1.2%
================================================================

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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