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Housing Starts in U.S. Probably Rose in August for Second Month

Builders broke ground on 598,000 homes at an annual rate, up 10.5 percent and the most since April, following a 541,000 pace in July, the Commerce Department said in Washington. Photographer: Jim R. Bounds/Bloomberg
Builders broke ground on 598,000 homes at an annual rate, up 10.5 percent and the most since April, following a 541,000 pace in July, the Commerce Department said in Washington. Photographer: Jim R. Bounds/Bloomberg

Sept. 21 (Bloomberg) -- Housing starts in the U.S. probably increased in August for a second consecutive month, signaling the industry is stabilizing close to record lows, economists said ahead of a report today.

Work began on 550,000 homes at an annual pace, up 0.7 percent from July’s 546,000 rate, according to the median forecast of 74 economists surveyed by Bloomberg News. Building permits, a proxy of future production, were little changed, the survey showed.

A jobless rate at or above 9.5 percent for the past 13 months is hurting builders such as Hovnanian Enterprises Inc., short-circuiting government efforts to stem foreclosures and revive the market by lowering interest rates. A distressed housing market is among reasons Federal Reserve policy makers meeting today will consider whether new measures are needed to boost growth.

“Housing remains in basically a depressed state,” Derek Holt, an economist at Scotia Capital Inc. in Toronto, said before the report. “We are still in a market that is dealing with a supply-demand imbalance.”

The Commerce Department’s report is due at 8:30 a.m. in Washington. Survey estimates ranged from 505,000 to 600,000. Starts plunged to a record-low 477,000 pace in April 2009 after reaching a three-decade high of 2.27 million in January 2006.

Fed Policy

The Fed’s policy-making Federal Open Market Committee is scheduled to announce its decision at about 2:15 p.m. The benchmark interest rate has been in a range of zero to 0.25 percent since December 2008. Economists surveyed by Bloomberg earlier this month forecast the central bank will hold that rate until late 2011.

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.”

The National Bureau of Economic Research yesterday said the recession that began in December 2007 ended in June 2009, making it the longest since the Great Depression. The Cambridge, Massachusetts-based group’s business cycle dating committee is the accepted arbiter of when recessions start and end.

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.

Credit Ended

Demand plunged after the deadline for signing contracts and becoming eligible for a government homebuyer credit worth as much as $8,000 lapsed April 30. The tax incentive provided temporary relief for the industry that precipitated the recession.

Rising foreclosures hurt 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.

The Obama administration has said it plans to announce proposals in the next few weeks for an emergency loan program for the unemployed to avert default, and a government mortgage refinancing effort to lower monthly mortgage payments to avoid foreclosures.

Orders Fall

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.

That may explain why shares of builders have declined this year, while the broader market has gained. The Standard & Poor’ Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and Lennar Corp., is down 3.5 percent so far this year compared with a 2.5 percent gain for the S&P 500.

The builder index jump 4.6 percent yesterday, the most in three months, after Miami-based Lennar reported better-than-estimated third-quarter profit. Lennar is among companies finding other ways to boost earnings as sales slump. The fourth-largest U.S. homebuilder by revenue is cutting costs and expanding its distressed investing unit.

                         Bloomberg Survey

================================================================
                           Housing  Housing Building Building
                            Starts   Starts  Permits  Permits
                            ,000’s     MOM%   ,000’s     MOM%
================================================================

Date of Release              09/21    09/21    09/21    09/21
Observation Period            Aug.     Aug.     Aug.     Aug.
----------------------------------------------------------------
Median                         550     0.7%      560     0.2%
Average                        547     0.2%      560     0.1%
High Forecast                  600     9.9%      580     3.8%
Low Forecast                   505    -7.5%      524    -6.3%
Number of Participants          74       74       56       56
Previous                       546     1.7%      559    -4.1%
----------------------------------------------------------------
4CAST Ltd.                     550     0.7%      560     0.2%
ABN Amro Inc.                  552     1.1%     ---
Action Economics               550     0.7%      560     0.2%
Aletti Gestielle SGR           560     2.6%      570     2.0%
Ameriprise Financial Inc       560     2.6%      570     2.0%
Banesto                        560     2.6%      560     0.2%
Bank of Tokyo- Mitsubishi      555     1.7%      554    -0.9%
Barclays Capital               545    -0.2%     ---
BBVA                           550     0.7%      570     2.0%
BMO Capital Markets            550     0.7%      560     0.2%
BNP Paribas                    550     0.7%     ---
BofA Merrill Lynch Research    530    -2.9%      565     1.1%
Briefing.com                   540    -1.1%      550    -1.6%
Capital Economics              550     0.7%     ---
CIBC World Markets             555     1.7%      560     0.2%
Citi                           540    -1.1%      570     2.0%
Commerzbank AG                 540    -1.1%      560     0.2%
Credit Agricole CIB            550     0.7%      560     0.2%
Credit Suisse                  530    -2.9%      550    -1.6%
Daiwa Securities America       520    -4.8%     ---
Danske Bank                    535    -2.0%      531    -5.0%
DekaBank                       560     2.6%      570     2.0%
Desjardins Group               550     0.7%      570     2.0%
Deutsche Bank Securities       555     1.7%      565     1.1%
Deutsche Postbank AG           560     2.6%     ---
DZ Bank                        530    -2.9%      540    -3.4%
First Trust Advisors           535    -2.0%     ---
FTN Financial                  525    -3.9%      550    -1.6%
Goldman, Sachs & Co.           562     2.9%     ---
Helaba                         546     0.0%      560     0.2%
High Frequency Economics       550     0.7%      560     0.2%
HSBC Markets                   550     0.7%      565     1.1%
Hugh Johnson Advisors          600     9.9%     ---
IDEAglobal                     555     1.7%      570     2.0%
IHS Global Insight             541    -0.9%      574     2.7%
Informa Global Markets         540    -1.1%      555    -0.7%
ING Financial Markets          550     0.7%      565     1.1%
Intesa-SanPaulo                550     0.7%      555    -0.7%
J.P. Morgan Chase              530    -2.9%      559     0.0%
Janney Montgomery Scott        528    -3.3%      524    -6.3%
Jefferies & Co.                557     2.0%      570     2.0%
Landesbank Berlin              505    -7.5%      560     0.2%
Landesbank BW                  570     4.4%      580     3.8%
Maria Fiorini Ramirez          540    -1.1%     ---
MF Global                      535    -2.0%      560     0.2%
MFC Global Investment          549     0.6%      560     0.2%
Mizuho Securities              546     0.0%     ---
Moody’s Analytics              530    -2.9%      550    -1.6%
Morgan Keegan & Co.            552     1.1%      575     2.9%
Morgan Stanley & Co.           530    -2.9%     ---
National Bank Financial        545    -0.2%      560     0.2%
Natixis                        555     1.7%     ---
Nomura Securities Intl.        520    -4.8%      576     3.0%
Nord/LB                        550     0.7%      560     0.2%
Pierpont Securities LLC        565     3.5%     ---
PineBridge Investments         563     3.0%     ---
PNC Bank                       575     5.3%     ---
Raymond James                  550     0.7%      560     0.2%
RBC Capital Markets            535    -2.0%      540    -3.4%
Scotia Capital                 540    -1.1%      550    -1.6%
Societe Generale               565     3.5%     ---
Standard Chartered             550     0.7%      560     0.2%
State Street Global Markets    540    -1.1%      565     1.1%
Stone & McCarthy Research      550     0.7%      567     1.4%
TD Securities                  580     6.2%      565     1.1%
Thomson Reuters/IFR            535    -2.0%      540    -3.4%
UBS                            545    -0.2%      560     0.2%
UniCredit Research             525    -3.9%      575     2.9%
University of Maryland         550     0.7%      560     0.2%
Wells Fargo & Co.              535    -2.0%     ---
WestLB AG                      550     0.7%      560     0.2%
Westpac Banking Co.            563     3.0%      559     0.0%
Woodley Park Research          576     5.5%      548    -2.0%
Wrightson ICAP                 530    -2.9%      550    -1.6%
================================================================

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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

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