Home Construction in U.S. Probably Held Near a Four-Year High

Photographer: Daniel Acker/Bloomberg

Lumber is delivered to a home being built by Brooks Construction in Peoria, Illinois, on Aug. 15, 2012. Close

Lumber is delivered to a home being built by Brooks Construction in Peoria, Illinois, on Aug. 15, 2012.

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Photographer: Daniel Acker/Bloomberg

Lumber is delivered to a home being built by Brooks Construction in Peoria, Illinois, on Aug. 15, 2012.

New-home construction in the U.S. probably held in July near a four-year high, adding to signs the market is stabilizing, economists said before a report today.

Builders broke ground on 756,000 houses at an annual rate, according to the median estimate of 79 economists surveyed by Bloomberg News. June’s 760,000 pace was the highest since October 2008. Other reports may show manufacturing in the Philadelphia area shrank in August and claims for unemployment benefits were little changed last week.

Less costly properties combined with record-low mortgage rates are reviving demand, helping builders like PulteGroup Inc. (PHM) boost profits. A drop in foreclosures, increased hiring and easier access to credit may be required to foster a more pronounced and sustained rebound in the industry that triggered the recession.

“Housing activity continues to improve,” said Michael Carey, chief economist for North America at Credit Agricole CIB in New York. “It’s still a slow recovery. The big picture for housing is one of a turning point this year and a pickup next year.”

The starts data are due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 730,000 to 800,000. Building permits, a proxy for future construction, may have climbed 1.2 percent to a 769,000 annual rate, according to the survey median.

Also at 8:30 a.m., figures from the Labor Department may show jobless claims rose to 365,000 last week from 361,000 the prior week, according to the Bloomberg survey median.

Philadelphia Factories

At 10 a.m., the Federal Reserve Bank of Philadelphia may report manufacturing in the region shrank for a fourth consecutive month, economists predicted. The bank’s index improved to minus 5 in August from minus 12.9 in July, according to the Bloomberg survey median. Figures less than zero indicate contraction.

Construction company leaders are turning less pessimistic. The National Association of Home Builders/Wells Fargo index of builder confidence climbed in August to the highest level in more than five years, the Washington-based group said yesterday.

Investors have taken notice. The Standard & Poor’s Supercomposite Homebuilder Index (S15HOME) has climbed 54 percent this year through yesterday, outpacing a 12 percent gain for the broader S&P 500 (SPX) Index.

More Affordable

Low borrowing costs and cheaper homes are helping spur demand. The average rate on a 30-year fixed mortgage dropped to 3.49 percent in the week ended July 26, the lowest in records dating to 1971, according to McLean, Virginia-based Freddie Mac. The median price of a new house was down 3.2 percent in June from the same time last year, according to figures from the Commerce Department.

PulteGroup, the largest U.S. homebuilder by revenue, posted a better-than-estimated profit and a 32 percent jump in orders in the second quarter. The Bloomfield Hills, Michigan-based company is seeing the market improve, while it had entered 2012 assuming new- home sales would be little-changed from 2011, Chairman and Chief Executive Officer Richard J. Dugas said.

“We have been pleasantly surprised as demand throughout the selling season and extending into these initial weeks of July has exceeded our expectations,” Dugas said on a July 26 conference call with analysts.

Still, “many of the macro drivers of demand really haven’t changed all that much,” he said, citing high unemployment, weak consumer sentiment and concern over Europe’s debt crisis and impending U.S. tax changes.

Raising Forecast

Home Depot Inc. (HD), the largest U.S. home-improvement retailer, reported second-quarter profit that topped analysts’ estimates and raised its forecast for profit this year as customers spent more on remodeling projects.

A sustained rebound in demand remains elusive. Sales of new homes unexpectedly dropped in June from a two-year high, Commerce Department figures showed. Contracts to buy existing homes fell 1.4 percent in June, according to the National Association of Realtors.

Builders also have to contend with distressed houses that add to inventory and restrain prices. The mortgage delinquency rate increased in the second quarter for the first time in a year, a sign more borrowers were struggling to pay their bills.

                         Bloomberg Survey
================================================================
                           Housing Building  Initial   Philly
                            Starts  Permits   Claims      Fed
                            ,000’s   ,000’s   ,000’s    Index
================================================================
Date of Release              08/16    08/16    08/16    08/16
Observation Period            July     July   11-Aug     Aug.
----------------------------------------------------------------
Median                         756      769      365     -5.0
Average                        757      768      364     -5.4
High Forecast                  800      805      375      5.0
Low Forecast                   730      737      350    -17.9
Number of Participants          79       52       45       56
Previous                       760      760      361    -12.9
----------------------------------------------------------------
4CAST                          765      765      368      0.0
ABN Amro                       768     ---      ---      -5.0
Action Economics               765      770      359     -5.0
Ameriprise Financial           753      770      365     -4.0
Banorte-IXE                   ---      ---      ---      -9.0
Bantleon Bank AG               780      780     ---      -5.1
Barclays                       758     ---       365     -7.0
Bayerische Landesbank         ---      ---      ---      -5.0
BBVA                           765      770      363     -7.0
BMO Capital Markets            770      765      365     ---
BNP Paribas                    750     ---       365     -3.0
BofA Merrill Lynch             755     ---       360     -7.0
Briefing.com                   770      750      365     -5.0
Capital Economics              760     ---      ---       0.0
CIBC World Markets             745      760     ---      ---
Citi                           770      770      365     -7.0
ClearView Economics            750      750     ---      -5.0
Comerica                       760     ---      ---      ---
Commerzbank AG                 740      760      360     -7.0
Credit Agricole CIB            745      775     ---      -6.0
Credit Suisse                  760      780      355     ---
Daiwa Securities America       750     ---      ---      ---
Danske Bank                    747      764     ---      -4.0
DekaBank                       752      765     ---      -4.0
Desjardins Group               758      750      365     -5.0
Deutsche Bank Securities       750      750      360      0.0
Deutsche Postbank AG           750     ---      ---      ---
DZ Bank                        760      755     ---     -10.0
Exane                          776     ---      ---      -4.0
First Trust Advisors           750     ---       363     -6.2
FTN Financial                  750      765     ---      ---
Goldman, Sachs & Co.           775     ---      ---      -6.0
Helaba                         770      760      365     -5.0
High Frequency Economics       770      770      370     -5.0
Horizon Investments            756     ---      ---      ---
HSBC Markets                   740      765      364     -4.0
Hugh Johnson Advisors          734     ---       360     -4.0
IDEAglobal                     755      770      365     -8.0
IHS Global Insight             766      775      370     -6.0
Informa Global Markets         750      765      370     -6.0
ING Financial Markets          741      768      365     -3.0
Insight Economics              740     ---       365     -5.0
Intesa Sanpaulo                740      765     ---      -4.0
J.P. Morgan Chase              740      780      365     -7.0
Janney Montgomery Scott        756      766     ---      ---
Jefferies & Co.                750      740      360     -8.0
John Hancock Financial         759      778      367     ---
Landesbank Berlin              735      780      370     ---
Landesbank BW                  750      780     ---      -4.0
Lloyds Bank                    760      770     ---      -6.0
Maria Fiorini Ramirez          750     ---      ---      ---
Market Securities              748     ---      ---      ---
MET Capital Advisors           730     ---      ---      ---
Mizuho Securities              737     ---       370    -10.0
Moody’s Analytics              764      778      361     -8.0
Morgan Stanley & Co.           760     ---       365     ---
National Bank Financial        765      770     ---      ---
Natixis                        740     ---      ---      ---
Nomura Securities              767      792     ---      -3.2
OSK Group/DMG                  755     ---      ---      ---
Pierpont Securities            760     ---       368     ---
PineBridge Investments         764     ---       360      2.0
PNC Bank                       750      775     ---      ---
Raiffeisenbank International   800      800     ---      ---
Raymond James                  765      775     ---      -5.0
RBC Capital Markets            742     ---       364      5.0
RBS Securities                 775     ---       365     ---
Regions Financial Corp         765      755     ---      ---
Renaissance Macro Research     750      760     ---      -3.0
Scotiabank                     765     ---       365     -7.5
SMBC Nikko Securities          760      780     ---      -8.0
Societe Generale               785      805      362    -16.5
Southern Polytechnic State    ---      ---       350     ---
Standard Chartered             760      770      365     -6.0
Stone & McCarthy               750      765      360    -17.9
TD Securities                  750      760      370      2.0
UBS                            770      780      360    -10.0
Union Investment               750      760     ---      ---
University of Maryland         760      765      370     -4.0
Wells Fargo & Co.              748     ---      ---      ---
Westpac Banking Co.            783      737      375     -3.0
Wrightson ICAP                 765      770      365     -8.0
================================================================

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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