Home Construction Starts in U.S. Probably Climbed in February
New residential construction probably increased in February, pointing to more progress in the housing industry that’s helping power the U.S. expansion, economists said before a report today.
Builders broke ground on 915,000 houses at an annual rate, up from an 890,000 pace in January and the second-highest since mid-2008, according to the median estimate of 81 economists surveyed by Bloomberg. Building permits, a proxy for future construction, may have advanced to an almost five-year high.
Confidence is being restored to the housing market as property values stabilize, the employment outlook brightens and mortgage rates hover around record lows. An easing of bank lending conditions would help bring home ownership within reach of more Americans and stoke bigger gains in home construction.
“The housing sector looks like it’s really turning,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “There’s a lot of room for anything housing related to give the economy a real boost.”
The housing starts figures are due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 872,000 to 1 million. Building permits climbed to a 925,000 annual rate, the most since June 2008, from 904,000 in January, according to the survey median.
Pulte, Lennar
Limited inventories and resilient sales are driving orders at builders such as PulteGroup Inc. (PHM) and Lennar Corp. (LEN) At the same time, lenders have imposed stricter standards on mortgages, an artifact of the subprime collapse that pushed the U.S. economy into its last recession, said Ara Hovnanian, chairman and chief executive officer of builder Hovnanian Enterprises Inc. (HOV) in Red Bank, New Jersey.
“On the whole, we’re still seeing definitely stricter guidelines,” Hovnanian said on a March 6 earnings call. “Eventually, the pendulum, which has swung to the overcorrection mode in terms of difficult qualification because of what happened with subprime, that pendulum will come back to the middle and that should add a further boost to the housing recovery a little later in the cycle.”
Homebuilder shares have outperformed the broader market. The Standard & Poor’s Supercomposite Homebuilding Index has surged 62.6 percent in the past year, compared with a 10 percent gain in the S&P 500.
Last Year
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 improvement, housing starts remain short of the 2.07 million in 2005, a three-decade high reached at the peak of the boom.
Residential construction has added to economic growth since the second quarter of 2011. The gains in homebuilding filter through to other parts of the economy as well -- from appliance makers such as Whirlpool Corp. (WHR) to retailers including home- improvement store Lowe’s Cos.
Rising home prices are prompting consumers to spend a bit more freely, Lowe’s Chairman and Chief Executive Officer Robert Niblock said.
“Consumers feel much better when it comes to discretionary spending, about spending on their home, if they believe the value is going up,” Niblock said on a Feb. 25 earnings call. “I call it the psychological permission to spend it and feel good about it.”
“The housing metrics are definitely moving in the right direction,” he said.
Federal Reserve
Monetary policy stimulus from the Federal Reserve has helped drive down mortgage costs and spurred the recovery in housing. Fed officials wrap up a two-day meeting tomorrow and they will probably agree to continue record asset purchases aimed at ensuring the expansion is sustained.
Cheaper borrowing costs are attracting buyers able to qualify for loans. The average rate on a 30-year, fixed-rate purchase loan was 3.63 percent last week, compared with 3.92 percent a year ago, according to McLean, Virginia-based Freddie Mac. The 30-year rate reached a record low of 3.31 percent in November.
Builder sentiment paused in March, a report showed yesterday. The National Association of Home Builders/Wells Fargo confidence index dropped by 2 points to 44. Readings below 50 mean more respondents said conditions were poor.
The group’s gauges of the sales outlook and customer traffic improved, according to the report, while an index of present single-family home sales fell to a five-month low.
Bloomberg Survey
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Housing Housing Building Building
Starts Starts Permits Permits
,000’s MOM% ,000’s MOM%
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Date of Release 03/19 03/19 03/19 03/19
Observation Period Feb. Feb. Feb. Feb.
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Median 915 2.8% 925 2.3%
Average 918 3.2% 927 2.5%
High Forecast 1000 12.4% 1000 10.6%
Low Forecast 872 -2.0% 900 -0.4%
Number of Participants 81 81 55 55
Previous 890 -8.5% 904 -0.6%
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4CAST 930 4.5% 930 2.9%
ABN Amro 917 3.0% ---
Action Economics 910 2.3% 920 1.8%
Ameriprise Financial 915 2.8% 920 1.8%
Bank of the West 915 2.8% 920 1.8%
Bank of Tokyo-Mitsubishi 925 3.9% ---
Bantleon Bank AG 930 4.5% 930 2.9%
Barclays 905 1.7% ---
Bayerische Landesbank 950 6.7% ---
BBVA 918 3.2% 926 2.4%
BMO Capital Markets 917 3.0% 922 2.0%
BNP Paribas 940 5.6% ---
BofA Merrill Lynch 915 2.8% 920 1.8%
Briefing.com 905 1.7% 915 1.2%
Capital Economics 910 2.3% ---
CIBC World Markets 898 0.9% 920 1.8%
Citi 940 5.6% 930 2.9%
ClearView Economics 940 5.6% 950 5.1%
Commerzbank AG 880 -1.1% 910 0.7%
Credit Agricole CIB 925 3.9% 920 1.8%
Credit Suisse 920 3.4% 930 2.9%
Daiwa Securities America 910 2.3% ---
Danske Bank A/S 908 2.0% 918 1.6%
DekaBank 930 4.5% 930 2.9%
Desjardins Group 912 2.5% 925 2.3%
Deutsche Bank Securities 900 1.1% 910 0.7%
Deutsche Postbank AG 910 2.3% ---
First Trust Advisors 922 3.6% ---
FTN Financial 922 3.6% 937 3.7%
Goldman, Sachs & Co. 935 5.0% ---
Hammer Partners SA 925 3.9% ---
Helaba 930 4.5% 905 0.1%
High Frequency Economics 905 1.7% 925 2.3%
HSBC Markets 932 4.7% 916 1.3%
Hugh Johnson Advisors 894 0.5% ---
IDEAglobal 910 2.3% 925 2.3%
IHS Global Insight 902 1.4% 922 2.0%
Informa Global Markets 910 2.3% 900 -0.4%
Intesa Sanpaolo 925 3.9% 930 2.9%
J.P. Morgan Chase 900 1.1% 930 2.9%
Janney Montgomery Scott 893 0.3% 918 1.6%
Jefferies 925 3.9% 910 0.7%
John Hancock 910 2.3% 917 1.4%
Landesbank Berlin 960 7.9% 970 7.3%
Landesbank BW 950 6.7% 920 1.8%
Lloyds Tsb Bank 924 3.8% 932 3.1%
Maria Fiorini Ramirez 905 1.7% ---
Market Securities 925 3.9% ---
MET Capital Advisors 905 1.7% ---
Modal Asset 899 1.0% ---
Moody’s Analytics 940 5.6% 930 2.9%
Morgan Stanley & Co. 920 3.4% ---
National Bank Financial 925 3.9% 935 3.4%
Natixis 921 3.5% ---
Nomura Securities 915 2.8% 935 3.4%
OSK Group/DMG 910 2.3% ---
Oxford Economics 901 1.2% 924 2.2%
Pantheon Macroeconomic 900 1.1% 920 1.8%
Pierpont Securities 920 3.4% ---
PNC Bank 935 5.1% ---
Prestige Economics 1000 12.4% 1000 10.6%
Raiffeisenbank International 975 9.6% 975 7.9%
Raymond James 930 4.5% 925 2.3%
RBC Capital Markets 915 2.8% ---
RBS Securities 920 3.4% ---
Regions Financial 930 4.5% 960 6.2%
Renaissance Macro Research 910 2.3% 915 1.2%
Santander 918 3.2% ---
Scotiabank 900 1.1% ---
SMBC Nikko Securities 900 1.1% 915 1.2%
Societe Generale 970 9.0% 950 5.1%
Standard Chartered Bank 910 2.3% 930 2.9%
Stone & McCarthy 915 2.8% 925 2.3%
TD Securities 900 1.1% 905 0.1%
UBS 925 3.9% 930 2.9%
UniCredit Research 915 2.8% 925 2.3%
Union Investment 900 1.1% 930 2.9%
University of Maryland 910 2.3% 920 1.8%
Wells Fargo & Co. 910 2.3% ---
Westpac Banking Co. 872 -2.0% 922 2.0%
Wrightson ICAP 895 0.6% 910 0.7%
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To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net