Housing starts in the U.S. increased more than forecast in August, outstripping a gain in building permits that signals residential construction will stay close to record lows.
Builders began work on 598,000 homes at an annual rate, up 10.5 percent and the most since April, the Commerce Department said today in Washington. Economists surveyed by Bloomberg News forecast a 550,000 pace. Permits, an indicator of future activity, were issued at a 569,000 rate.
Builders took out fewer applications to start single-family homes for a fifth consecutive month, signaling a jobless rate at or above 9.5 percent for the past 13 months is hurting companies such as Hovnanian Enterprises Inc. A distressed housing market is among reasons Federal Reserve policy makers meeting today said they’re prepared to provide “additional accommodation” if needed to boost growth.
“The housing market has found a bottom, and we’re bouncing along here,” said Thomas Simons, an economist at Jefferies Group Inc. in New York. “The market is challenged by supply, and until that is cleared out, it will be tough for the homebuilders. We also need additional job creation.”
Estimates for August starts in the Bloomberg survey of 74 economists ranged from 505,000 to 600,000 after a previously reported 546,000 a month earlier.
Stocks dropped and Treasury securities jumped as investors speculated the Fed will buy more government debt to spur the economy. The Standard & Poor’s 500 Index fell 0.3 percent to 1,139.78 at the 4 p.m. close in New York. The S&P Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and Lennar Corp., fell 0.3 percent. The yield on the 10-year Treasury note dropped to 2.57 percent at 5:12 p.m. in New York from 2.70 percent late yesterday.
The gain in starts was led by a 32 percent jump in construction of multifamily units, which is often volatile. Work began on 4.3 percent more single-family houses, which accounted for 73 percent of the industry.
Similarly, the 1.8 percent increase in building permits last month reflected a gain among multifamily units, which include townhouses and apartment building. Applications for single-family projects dropped to the lowest level since April 2009.
“Even though single-family starts moved in the right direction, there is still weakness evident in the single-family data,” Daniel Silver, an economist at JPMorgan Chase & Co. in New York, said in a note to clients. “The level of starts relative to permits indicates that the growth in housing starts may not be sustained.”
Three of four regions of the country had an increase in starts last month, led by a 34 percent surge in the West and a 22 percent gain in the Midwest.
The Fed’s policy-making Open Market Committee said it’s willing to ease monetary policy further to propel the economy and reduce unemployment. Officials today kept the benchmark interest rate in a range of zero to 0.25 percent, where it’s been since December 2008.
The pace of the economic recovery and job growth has “slowed in recent months,” the Fed said in its statement.
The central bank said in its Beige Book survey of regional Fed banks earlier this month that there were “widespread signs of a deceleration” in the economy from mid-July through the end of August. Most areas of the U.S. reported “very low or declining home sales.”
Sales of new houses dropped in July to the lowest level in records dating back to 1963, figures from the Commerce Department showed last month. The government is scheduled to release August sales data on Sept. 24.
Demand plunged after the deadline for signing contracts and becoming eligible for a government homebuyer credit worth as much as $8,000 lapsed on April 30. The tax incentive provided temporary relief for the industry that precipitated the recession.
Rising foreclosures depress prices and mean homes stay on the market longer, hurting builders. Home seizures reached a record in August for the third time in five months, RealtyTrac Inc. said Sept. 16.
A lack of jobs is preventing some buyers from making mortgage payments. The 13 months of unemployment at 9.5 percent or higher matches the period from mid 1982 to mid 1983 as the longest span of elevated joblessness since monthly records began in 1948.
Payrolls in August
Payrolls dropped in 36 states in August, indicating the labor market will take time to rebound, figures from the Labor Department also showed. Employers in Michigan cut 50,300 jobs last month, the biggest drop since January 2009. Texas and California rounded out the three states with the biggest job losses.
Joblessness climbed in 27 states, with Nevada reaching a record 14.4 percent rate, the highest in the nation.
Treasury Secretary Timothy F. Geithner said today that efforts to improve consumer access to mortgage information show progress in implementing the financial regulatory overhaul Congress passed earlier this year.
“Wherever possible, we are committed to expediting completion of the law’s requirements ahead of statutory deadline,” Geithner said at a Treasury Department forum on mortgage disclosure. “Simplifying these forms is a prime example of where we can and will accelerate our efforts to deliver real benefits to consumers as soon as possible.”
The end of the homebuyer credit, joblessness and sagging consumer confidence prompted a decline in orders at Hovnanian, the largest homebuilder in New Jersey said on Sept 1. The company said its net orders dropped 37 percent in the quarter ended July 31 from a year earlier.
“Job creation is the key to a housing recovery, which makes it difficult to predict how improvements in the economy and housing market play out,” Chief Executive Officer Ara Hovnanian said in a statement.