Housing Starts in U.S. Probably Climbed in June as Rates Fell
Builders probably broke ground on U.S. homes in June at the fastest pace in almost four years, indicating the outlook for residential real estate is brightening, economists said before a report today.
Housing starts rose 5.2 percent last month to a 745,000 annual pace, the strongest since October 2008, according to the median estimate of 79 economists surveyed by Bloomberg News. Building permits, a proxy for future construction, dropped 2.4 percent to a 765,000 rate, the survey showed.
Record-low mortgage rates and cheaper properties are attracting buyers, encouraging builders faced with lean inventories to boost construction. At the same time, limited employment opportunities and competition from distressed properties are hurdles for the industry.
“The long-awaited housing market recovery is definitely under way as demand is improving,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “Continued growth in the number of households, pent-up demand, very low prices and mortgage rates that have resulted in record- high affordability” are underpinning demand, he said.
The housing starts figures are due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey for June ranged from 710,000 to 800,000.
A report yesterday showed confidence among U.S. homebuilders climbed in July by the most since September 2002. The National Association of Home Builders/Wells Fargo index of sentiment increased by 6 points to 35 this month as sales and buyer traffic improvement.
Fed’s Bernanke
Federal Reserve Chairman Ben S. Bernanke, in testimony yesterday to Congress, indicated the industry was on the mend.
Growth in construction and “historically low mortgage rates” are among “modest signs” of a housing recovery, even as buyers show concern about personal finances and the broader economy and have difficulty meeting lending standards, Bernanke said.
The average 30-year, fixed mortgage rate declined to 3.56 percent last week, the lowest in data going back to 1972, according to McLean, Virginia-based Freddie Mac.
“Evidence from the field suggests that the ‘for sale’ housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process,” Stuart Miller, chief executive officer at Lennar Corp., the third-largest U.S. homebuilder by revenue, said in a June 27 statement.
The Standard & Poor’s Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and PulteGroup Inc., has climbed 52 percent this year, outpacing an 8.4 percent gain in the broader S&P 500 Index.
‘Improvement Everywhere’
“We are seeing different improvements in different parts of the country, but we’re seeing improvement everywhere,” Larry Nicholson, president and chief executive officer at West Lake Village, California-based builder Ryland Group Inc., said on a June 13 conference call. “So that’s the key there.”
Home prices are stabilizing and starting to increase. The S&P/Case-Shiller index of property values adjusted for seasonal variations rose 0.7 percent in April, the third straight gain. A pickup in home sales may help spur gains in building materials.
“As we start to move prices up, it starts to draw people off the sidelines who are potential homebuyers, people that are at the age they should be buying a house, but they’ve been concerned about a further decline in prices,” Daniel Fulton, chairman and chief executive officer of forest-products company Weyerhaeuser Co. (WY), said at a June 13 conference. “So we’re starting to see some increase in activity.”
At the same time, foreclosures are hindering the housing rebound. Initial notices, the start of the process, jumped 6 percent in the second quarter from a year earlier, the first annual increase since 2009, according to RealtyTrac Inc., a real estate data provider in Irvine, California.
The increase may reflect February’s $25 billion settlement among 49 state attorneys general and the five major mortgage servicers for improper and fraudulent paperwork related to foreclosures, according to a Bloomberg Government study. The pace of foreclosures had slowed for at least a year while the settlement was being resolved.
Bloomberg Survey
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Housing Building
Starts Permits
,000’s ,000’s
==============================================
Date of Release 07/18 07/18
Observation Period June June
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Median 745 765
Average 744 768
High Forecast 800 850
Low Forecast 710 735
Number of Participants 79 51
Previous 708 784
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4CAST Ltd. 770 770
ABN Amro Inc. 744 ---
Action Economics 735 745
Ameriprise Financial Inc 735 768
Analytical Synthesis 732 765
Banca Aletti & C spa 730 760
Bantleon Bank AG 760 775
Barclays 745 ---
BBVA 720 750
BMO Capital Markets 750 ---
BNP Paribas 750 ---
BofA Merrill Lynch Resear 740 745
Briefing.com 715 765
Capital Economics 780 ---
CIBC World Markets 740 740
Citi 740 795
ClearView Economics 720 750
Comerica Inc 740 ---
Commerzbank AG 730 760
Credit Agricole CIB 745 795
Credit Suisse 760 750
Daiwa Securities America 720 ---
Danske Bank 764 ---
Desjardins Group 750 740
Deutsche Bank Securities 725 760
Deutsche Postbank AG 760 ---
DZ Bank 765 735
Exane 738 ---
Fact & Opinion Economics 750 ---
First Trust Advisors 745 ---
FTN Financial 755 775
Goldman, Sachs & Co. 744 ---
Helaba 750 750
High Frequency Economics 760 775
HSBC Markets 735 755
Hugh Johnson Advisors 720 ---
IDEAglobal 730 775
IHS Global Insight 752 780
Informa Global Markets 720 740
ING Financial Markets 756 762
Insight Economics 750 ---
Intesa Sanpaulo 730 765
J.P. Morgan Chase 750 785
Janney Montgomery Scott L 720 800
Jefferies & Co. 745 760
John Hancock Financial 722 784
Landesbank Berlin 740 750
Landesbank BW 750 770
Lloyds Bank Wbm 750 765
Maria Fiorini Ramirez Inc 745 ---
Market Securities 755 ---
MET Capital Advisors 710 ---
Mizuho Securities 722 ---
Moody’s Analytics 755 770
Morgan Stanley & Co. 725 ---
National Bank Financial 740 765
Natixis 735 ---
Nomura Securities Intl. 732 804
Nord/LB 730 770
OSK Group/DMG 755 ---
Pierpont Securities LLC 760 ---
PNC Bank 750 ---
Raiffeisenbank Internatio 790 800
Raymond James 745 800
RBC Capital Markets 732 ---
RBS Securities Inc. 745 ---
Scotiabank 750 ---
SMBC Nikko Securities 745 750
Societe Generale 800 850
Standard Chartered 745 760
Stone & McCarthy Research 750 765
TD Securities 750 760
UBS 770 775
UniCredit Research 750 750
Union Investment 730 780
University of Maryland 740 750
Wells Fargo & Co. 749 ---
Westpac Banking Co. 729 761
Wrightson ICAP 760 790
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To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
Housing Starts in U.S. Rose in June to Highest Level Since 2008
Ronda Churchill/Bloomberg
A construction crew works on a new home in the PulteGroup Inc. development of Villa Trieste in Las Vegas.
A construction crew works on a new home in the PulteGroup Inc. development of Villa Trieste in Las Vegas. Photographer: Ronda Churchill/Bloomberg
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