Annualized Rate of U.S. New-Home Groundbreakings in February: 698,000
The U.S. housing market is showing signs of recovery. New-home sales have been rising since August, existing single-family home sales in January logged their biggest increase in two years and homebuilder confidence in March rose for the sixth straight month. While new-housing starts came in at 698,000 in February -- a bit lower than expected -- the trend has been up since February 2011, when new housing starts came in at just 518,000. Chris Low, an economist at FTN Financial, told Bloomberg News that while he expects housing starts will probably advance this year, it should be a "slow slog."
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Why It Matters
The American dream of middle-class home equity remains under siege. Mortgage or rent typically accounts for the biggest chunk of household spending, according to the Bureau of Economic Analysis, and house payments still have many in trouble. According to analysts at Bloomberg Industries, 22.8 percent of mortgage holders owe more than their homes are worth and an additional 5 percent could be close. While the number of foreclosures fell by 8 percent in February, the number of default filings (a lender's notice of delinquency) has been rising, according to Bloomberg News. That means more foreclosures may be coming, which could depress local prices.
Graphic by Charlos Gary/Bloomberg
What It Means for Your Portfolio
While new housing starts hover near a three-year high, new building permits -- which usually lag the start of construction by about a month, according to the National Association of Home Builders -- are up 5.1 percent, to 717,000 in February. That's the highest since October 2008. "We have the wind at our back as the economy recovers and housing improves," said Sheree Bargabos, president of roofing and asphalt at Owens Corning on a March 9 conference call. Investors seem to agree. The iShares U.S. Home Construction ETF is up 27 percent so far this year, to $15 per share, its highest since May 2010.
Photograph by Sandy Huffaker/Bloomberg