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Home Construction in U.S. Probably Cooled From Four-Year High

Home Construction in U.S. Probably Cooled From Four-Year High
Builders broke ground on houses at a 920,000 annual rate, down from December’s 954,000 pace that was the fastest since June 2008. Photographer: David Paul Morris/Bloomberg

Feb. 20 (Bloomberg) -- New residential construction in the U.S. probably cooled in January from a four-year high, signaling the industry’s momentum paused at the start of 2013, economists said before a report today.

Builders broke ground on houses at a 920,000 annual rate, down from December’s 954,000 pace that was the fastest since June 2008, according to the median estimate of 85 economists surveyed by Bloomberg. Housing permits, a proxy for future construction, probably rose.

Faster hiring and easier access to credit are needed to help complement historically low mortgage rates and stoke a sustained real-estate rebound. Rising sales at builders such as PulteGroup Inc. and Lennar Corp. indicate housing will keep contributing to growth this year after having emerged as a bright spot in the economy in 2012.

“It’s a moderate recovery,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, the largest U.S. mortgage lender. “We’re seeing some month-to-month volatility. Housing is getting better.”

The housing report is due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 870,000 to 1 million. Building permits may have climbed in January to a 920,000 annual rate, the highest since July 2008, according to the survey median.

Producer Prices

Also at 8:30 a.m., Labor Department data may show wholesale prices advanced 0.3 percent in January, the first rise in four months, according to the Bloomberg survey median. The so-called core producer price index, which excludes food and fuel costs, rose 1.7 percent from January 2012, the smallest year-over-year gain in two years and a sign inflation is contained, economists projected.

Few price pressures mean Federal Reserve officials have room to hold down borrowing costs, minutes of their Jan. 29-30 meeting may show today. The details may shed light on the debate among policy makers on how long to continue their bond buying effort, designed to foster economic growth and cut 7.9 percent unemployment.

The Fed’s steps to keep mortgage costs low have helped bring about a turnaround in housing, the industry that was at the center of the financial crisis. For all of last year, builders began work on 780,000 homes, a 28 percent increase from 2011 and the third straight annual gain. Even with the yearly improvement, housing starts remain short of the 2.07 million in 2005 at the peak of the boom, which was three-decade high.

Builder Sentiment

Sentiment in the industry leveled off this month from a more than six-year high, figures showed yesterday. The National Association of Home Builders/Wells Fargo index of builder confidence fell to 46 from the prior month’s 47 that matched the highest reading since April 2006.

Company results indicate the improvement in residential real estate will continue. PulteGroup, Lennar and D.R. Horton Inc., the top three U.S. homebuilders by market value, said orders rose in the most recently reported quarter.

“The combination of incredibly low mortgage rates, continued increases in rental rates and especially rising home prices, and very low -- and likely to stay low -- inventory levels for housing lead us to believe that 2013 will be a better year for U.S. housing than 2012,” Richard Dugas, chief executive officer of Bloomfield Hills, Michigan-based PulteGroup, said on a Jan. 31 earnings call.

The Standard & Poor’s Supercomposite Homebuilding Index has surged 68.5 percent in the 12 months to Feb. 19, outpacing a 12.5 percent gain in the broader S&P 500.

Prime Season

Builders are now gearing up for the spring selling season, traditionally viewed as starting the weekend after the National Football League’s Super Bowl, an event held Feb. 3.

Declining mortgage costs have made it cheaper to buy a home for those who qualify for credit. The average fixed rate on a 30-year loan held at 3.53 percent in the week ended Feb. 14, down from 3.87 percent a year ago, figures from McLean, Virginia-based Freddie Mac showed.

Increased household formation is also encouraging builders to diversify into construction of apartments. Miami-based Lennar in January said it plans to construct $1 billion of multifamily properties, while Toll Brothers Inc., the largest U.S. luxury-home builder, said it will begin development of high-end college dormitories.

                      Bloomberg Survey

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

Date of Release              02/20    02/20    02/20    02/20
Observation Period            Jan.     Jan.     Jan.     Jan.
----------------------------------------------------------------
Median                        0.3%     0.2%      920      920
Average                       0.3%     0.2%      921      921
High Forecast                 1.1%     0.5%     1000     1000
Low Forecast                 -0.1%     0.0%      870      900
Number of Participants          74       67       85       58
Previous                     -0.3%     0.1%      954      909
----------------------------------------------------------------
4CAST                         0.1%     0.4%      900      910
ABN Amro                      0.3%     ---       925     ---
Action Economics              0.5%     0.2%      910      915
Ameriprise Financial          0.2%     0.1%      930      915
Banca Aletti                 -0.1%     0.1%      884      900
Bank of the West              0.5%     0.2%      920      920
Bank of Tokyo-Mitsubishi      0.4%     0.2%      920     ---
Bantleon Bank AG              ---      ---       930      925
Barclays                      0.4%     0.2%      925     ---
Bayerische Landesbank         0.3%     ---       940     ---
BBVA                          0.3%     0.2%      930      900
BMO Capital Markets           0.0%     0.2%      914      929
BNP Paribas                   0.4%     0.1%      910     ---
BofA Merrill Lynch            0.5%     0.2%      930      940
Briefing.com                  0.1%     ---       900      915
Capital Economics             0.1%     0.1%      920     ---
CIBC World Markets            0.1%     0.2%      914      921
Citi                          0.5%     0.3%      940      915
ClearView Economics           0.2%     0.1%      910      920
Comerica                      0.2%     0.1%      925     ---
Commerzbank AG                0.1%     0.1%      900      920
Credit Agricole CIB           0.5%     0.1%      915      915
Credit Suisse                 0.8%     0.5%      930      910
Daiwa Securities America      0.1%     0.1%      900     ---
Danske Bank A/S               0.2%     0.1%      913      908
DekaBank                      ---      ---       930      920
Desjardins Group              0.1%     0.1%      900      915
Deutsche Bank Securities      0.5%     0.1%      950      950
Deutsche Postbank AG          ---      ---       930     ---
Fact & Opinion Economics      0.3%     0.2%      910     ---
First Trust Advisors          0.2%     0.3%      925     ---
FTN Financial                 0.4%     0.2%      930      915
Goldman, Sachs & Co.          0.1%     0.1%      925     ---
Hammer Partners SA            ---      ---       920     ---
Helaba                        0.4%     0.2%      940      900
High Frequency Economics      0.7%     0.3%      895      915
HSBC Markets                  0.3%     0.3%      925      915
Hugh Johnson Advisors         0.3%     0.2%      873     ---
IDEAglobal                    0.5%     0.2%      935      915
IHS Global Insight            1.0%     0.4%      911      925
Informa Global Markets        0.4%     0.1%      915      905
ING Financial Markets         0.4%     0.2%      929      905
Intesa Sanpaolo               0.5%     0.2%      940      920
J.P. Morgan Chase             0.4%     0.3%      890      920
Janney Montgomery Scott       0.3%     0.0%      939      929
Jefferies & Co.               0.5%     0.1%      922      920
John Hancock Financial        0.3%     0.1%      924      930
Landesbank Berlin             0.2%     0.2%      920      920
Landesbank BW                 ---      ---       930      920
Lloyds Bank                   0.4%     0.2%      926      930
Maria Fiorini Ramirez         0.4%     0.2%      925     ---
Market Securities             0.1%     0.2%      911     ---
MET Capital Advisors          0.1%     ---       920     ---
Modal Asset                   ---      ---       955     ---
Moody’s Analytics             0.6%     0.2%      913      920
Morgan Stanley & Co.          0.5%     0.2%      925     ---
National Bank Financial       0.4%     0.2%      940      930
Natixis                       0.7%     0.2%      964     ---
Nomura Securities             0.4%     0.2%      956      935
Nord/LB                       0.4%     0.2%      910      910
OSK Group/DMG                 ---      ---       885     ---
Oxford Economics              0.0%     0.1%      959      928
Pantheon Macroeconomic        0.3%     0.1%      900      920
Pierpont Securities           0.4%     0.2%      905     ---
PineBridge Investments        0.3%     0.1%      897     ---
PNC Bank                     -0.1%     0.1%      895      920
Prestige Economics            ---      ---       970     1000
Raiffeisenbank International  0.3%     0.4%     1000     1000
Raymond James                 0.3%     0.1%      920      915
RBC Capital Markets           0.4%     0.2%      900     ---
Regions Financial             0.5%     0.2%      910      905
Santander                     ---      ---       910     ---
Scotiabank                    ---      ---       950     ---
SMBC Nikko Securities         0.3%     0.2%      870      900
Societe Generale              1.1%     0.3%      965      930
Standard Chartered Bank       0.4%     ---       910      905
Stone & McCarthy              0.3%     0.1%      910      900
TD Securities                 0.3%     0.2%      910      920
UBS                           0.8%     0.2%      950      925
UniCredit Research            ---      ---       900      900
Union Investment              0.5%     ---       950      925
University of Maryland        0.3%     0.2%      910      920
Wells Fargo & Co.             0.3%     0.3%      900     ---
Westpac Banking Co.           0.3%     ---       906      945
Wrightson ICAP                0.1%     0.1%      910      905
================================================================

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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