Home Construction in U.S. Probably Held Near a Four-Year High
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
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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 08/16 08/16 08/16 08/16
Observation Period July July 11-Aug Aug.
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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
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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
Housing Starts in U.S. Fall as Permits Reach Four-Year Hig
Daniel Acker/Bloomberg
Lumber is delivered to a home being built by Brooks Construction in Peoria, Illinois, on Aug. 15, 2012.
Lumber is delivered to a home being built by Brooks Construction in Peoria, Illinois, on Aug. 15, 2012. Photographer: Daniel Acker/Bloomberg
Aug. 15 (Bloomberg) -- Michael Darda, chief economist and chief market strategist at MKM Partners LP, talks about the outlook for the U.S. stock market and economy. Darda speaks with Deirdre Bolton, Joshua Lipton and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Home Sales in U.S. Probably Rose
Ty Wright/Bloomberg
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.
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. Photographer: Ty Wright/Bloomberg
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