Housing Starts in U.S. Probably Fell From Almost Five-Year High

Housing starts in the U.S. probably fell in April from an almost five-year high, indicating a pause in the industry’s progress as builders slowed work on apartment buildings, economists said before a report today.

Beginning construction of new homes dropped to a 970,000 annual rate after jumping in March to a 1.04 million pace, the fastest since June 2008, according to the median estimate of 81 economists surveyed by Bloomberg. Other figures today may show cheaper gasoline helped keep the cost of living in check.

Near record-low mortgage rates and improving job opportunities are drawing buyers into a market that remains a bright spot for the expansion. The increase in demand is stretching beyond builders and giving a boost to lenders, brokers and suppliers of construction materials.

“It’s a sector right now that’s providing a lot of support to the economy and certainly has a lot of room to run,” said Brett Ryan, a U.S. economist at Deutsche Bank Securities Inc. in New York, who projects starts may reach a 1.2 million pace by year-end. “It’s going to be a key driver of growth in the back half of the year.”

The Commerce Department will release the housing starts data at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from rates of 873,000 to 1.05 million.

Building Permits

The number of building permits, a proxy for future construction, climbed to 941,000 in April, the highest since June 2008, from 902,000 a month earlier, according to the median Bloomberg projection.

Builders began work on 780,000 homes in 2012, a 28 percent increase from the prior year and the third straight annual advance. Even with the gains, starts remain short of the 2.1 million reached in 2005 at the peak of the boom, which was a three-decade high.

A measure of builder optimism climbed in May for the first time in five months, a National Association of Home Builders/Wells Fargo index of builder confidence showed yesterday. The gauge rose to 44 from 41 in April, according to the Washington-based group.

“There is no question there is a lot of positive momentum in the marketplace,” Ara Hovnanian, chairman and chief executive officer at Red Bank, New Jersey-based builder Hovnanian Enterprises Inc. (HOV), said at a May 9 conference. “In terms of sales, office activity and traffic, we’re feeling positive momentum.”

Builder Shares

Homebuilder shares have outperformed the broader market. The Standard & Poor’s Supercomposite Homebuilding Index has surged 23.6 percent this year, compared with a 16.3 percent gain in the S&P 500.

Cheaper borrowing costs are attracting buyers with access to credit. The average rate on a 30-year, fixed purchase loan was 3.42 percent for the week ended May 9, down from 3.83 percent a year ago, according to McLean, Virginia-based Freddie Mac. The rate reached a record low of 3.31 percent in November.

Suppliers have been racing to keep pace with orders. Sales at Ply Gem Holdings Inc. in Cary, North Carolina, increased 7.5 percent in the first quarter compared with a year earlier on demand for its windows, doors, vinyl siding and other construction materials.

A strengthening housing market is also giving a lift to brokers and mortgage lenders. Redwood Trust Inc. (RWT) is helping to meet growing demand for large purchase-money mortgages known as jumbos. The real-estate financing company, based in Mill Valley, California, issued about $2.5 billion worth of home loan securities in 2012 and expects to issue $8 billion this year.

‘Strong’ Housing

“Now is a great time to be taking credit risk on newly originated loans,” Redwood President Brett Nicholas said at a May 14 conference. “There has been a recovery in housing, particularly in the jumbo markets, really nationwide because housing has really come back strong.”

Real estate agents saw the biggest surge in commissions last month for any April in data going back to 1996, according to Jonathan Basile, director of U.S. economics at Credit Suisse in New York.

“It blows every other April away,” Basile said. “It’s a great sign. It hits home when you hear it echo, and it’s echoing now to the people who sell the homes.”

While Americans may be paying more to Realtors, another report today is projected to show cheaper gasoline is keeping a lid on inflation. The consumer-price index fell 0.3 percent in April after a 0.2 percent decrease a month earlier, the first back-to-back decline since the end of 2008, according to the Bloomberg survey median. The Labor Department will release figures at 8:30 a.m. in Washington.

The cost of living probably rose 1.3 percent from April 2012, the smallest year-over-year gain since November 2010, according to the median forecast.

                        Bloomberg Survey

================================================================
                               CPI  Housing  Housing  Initial
                                     Starts   Starts   Claims
                              MOM%   ,000’s     MOM%   ,000’s
================================================================

Date of Release              05/16    05/16    05/16    05/16
Observation Period           April    April    April   11-May
----------------------------------------------------------------
Median                       -0.3%      970    -6.4%      330
Average                      -0.2%      974    -6.0%      332
High Forecast                 0.3%     1050     1.4%      370
Low Forecast                 -0.4%      873   -15.7%      315
Number of Participants          81       81       81       50
Previous                     -0.2%     1036     7.0%      323
----------------------------------------------------------------
4CAST Ltd.                   -0.3%      930   -10.2%      330
ABN Amro Inc.                -0.2%      984    -5.0%      330
Action Economics             -0.1%      980    -5.4%      339
Ameriprise Financial Inc     -0.3%      975    -5.9%      328
Banca Aletti & C spa          ---      ---                333
Bank of the West             -0.2%      980    -5.4%      340
Bank of Tokyo- Mitsubishi    -0.3%     1000    -3.5%      335
Bantleon Bank AG             -0.3%      970    -6.4%     ---
Barclays                     -0.3%      970    -6.4%      330
Bayerische Landesbank        -0.2%     1000    -3.5%     ---
BBVA                         -0.2%      960    -7.3%      315
BMO Capital Markets          -0.2%      963    -7.1%      330
BNP Paribas                  -0.4%      960    -7.3%      330
BofA Merrill Lynch Resear    -0.2%      950    -8.3%      335
Capital Economics            -0.2%      950    -8.3%     ---
CIBC World Markets           -0.3%      960    -7.3%     ---
Citi                         -0.3%      970    -6.4%      330
ClearView Economics           0.1%      980    -5.4%     ---
Commerzbank AG               -0.3%      965    -6.9%     ---
Credit Agricole CIB          -0.3%      990    -4.4%     ---
Credit Suisse                -0.3%      960    -7.3%      335
Daiwa Securities America     -0.2%      950    -8.3%     ---
Danske Bank A/S              -0.3%     ---               ---
DekaBank                     -0.2%     1000    -3.5%     ---
Desjardins Group             -0.3%      920   -11.2%      327
Deutsche Bank Securities     -0.3%      980    -5.4%      325
Deutsche Postbank AG         -0.1%      990    -4.4%     ---
DZ Bank                       0.0%     1050     1.4%     ---
Fact & Opinion Economics     -0.1%      950    -8.3%      335
First Trust Advisors         -0.3%      973    -6.1%      333
FTN Financial                -0.3%      970    -6.4%     ---
Goldman, Sachs & Co.         -0.2%      979    -5.5%     ---
Hammer Partners SA            ---       985    -4.9%     ---
Helaba                       -0.1%      990    -4.4%      340
High Frequency Economics     -0.3%      940    -9.3%      335
HSBC Markets                 -0.4%      950    -8.3%      341
Hugh Johnson Advisors         0.1%      873   -15.7%      340
IDEAglobal                   -0.3%     1010    -2.5%      330
IHS Global Insight           -0.3%      971    -6.3%      332
Informa Global Markets       -0.4%      960    -7.3%      325
ING Financial Markets        -0.3%      965    -6.9%      325
Intesa Sanpaolo              -0.2%      960    -7.3%     ---
J.P. Morgan Chase            -0.3%      985    -4.9%      330
Janney Montgomery Scott L     0.0%      990    -4.4%     ---
Jefferies LLC                -0.2%      975    -5.9%      330
John Hancock Financial       -0.1%     1050     1.4%      328
Landesbank Berlin             0.0%      985    -4.9%     ---
Landesbank BW                -0.1%      990    -4.4%     ---
Lloyds Tsb Bank Plc          -0.3%     1012    -2.3%      325
Maria Fiorini Ramirez Inc    -0.3%      970    -6.4%      330
Market Securities            -0.3%      969    -6.5%     ---
MET Capital Advisors         -0.1%     1020    -1.5%     ---
Modal Asset                   ---       974    -6.0%     ---
Moody’s Analytics            -0.3%      973    -6.1%      328
Morgan Stanley               -0.3%      985    -4.9%     ---
National Bank Financial      -0.1%      970    -6.4%     ---
Natixis                       0.0%     1005    -3.0%     ---
Nomura Securities Intl.      -0.1%      994    -4.1%     ---
OSK Group/DMG                -0.3%      970    -6.4%     ---
Oxford Economics Ltd          0.0%      980    -5.4%      330
Pantheon Macroeconomic       -0.3%      950    -8.3%      330
Pierpont Securities LLC      -0.3%      955    -7.8%      328
PineBridge Investments       -0.2%      953    -8.0%      335
PNC Bank                     -0.3%      950    -8.3%     ---
Prestige Economics            0.2%     1015    -2.0%     ---
Raiffeisenbank Internatio    -0.3%      970    -6.4%     ---
Raymond James                -0.3%     1000    -3.5%      326
RBC Capital Markets          -0.3%      960    -7.3%      330
RBS Securities Inc.          -0.3%      975    -5.9%      333
Regions Financial Corp       -0.2%      955    -7.8%     ---
Santander Asset Mgmt         -0.2%      960    -7.3%     ---
Scotiabank                   -0.3%     1000    -3.5%      330
SMBC Nikko Securities        -0.2%      970    -6.4%     ---
Societe Generale             -0.4%      990    -4.4%      329
Southbay Research             ---      ---                334
Southern Polytechnic Stat     0.3%     ---                370
Standard Chartered Bank      -0.2%      960    -7.3%      330
Stone & McCarthy Research    -0.2%      950    -8.3%      320
TD Securities                -0.2%      965    -6.9%      330
UBS                          -0.3%      965    -6.9%      330
UniCredit Research           -0.3%      950    -8.3%     ---
University of Maryland       -0.2%      990    -4.4%      340
Wells Fargo & Co.            -0.2%      976    -5.8%     ---
Westpac Banking Co.          -0.1%      989    -4.5%      330
Wrightson ICAP               -0.3%      965    -6.9%      330
================================================================

To contact the reporter on this story: Lorraine Woellert in Washington lwoellert@bloomberg.net

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

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