Housing Starts in U.S. Probably Steadied After Jumping in May
Builders in the U.S. probably broke ground on about the same number of houses in June, preserving the previous month’s surge and indicating the industry’s slump is easing, economists said before a government report today.
Housing starts fell 0.4 percent to an annual rate of 530,000 after jumping 17 percent in May, according to the median forecast of 73 economists in a Bloomberg News survey. Building permits probably increased to a 524,000 annual rate.
Lower borrowing costs and plunging prices are making houses more affordable, helping to stem the decline in sales and alleviating the worst housing slowdown since the Great Depression. Stabilization would rid the economy of the drag from declines in residential construction that have shaved almost a percentage point off growth over the last three years.
“You’re seeing a leveling off,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. “Later on in the year, if we do get the overall improvement in the economy, that will go along with an improvement in home data.”
The Commerce Department’s report is due at 8:30 a.m. in Washington. Projections in the Bloomberg News survey ranged from 479,000 to 564,000.
Construction of single-family houses, which account for 75 percent of the industry, have been rising since March after reaching a record low in the first two months of the year.
Multifamily Gyrations
Multifamily projects, which soared 62 percent in May after plunging 49 percent in April and 26 percent in March, have obscured the underlying improvement in residential construction.
“We’ve seen a pretty nice pickup in permits over the last few months and it’s really been driven by single-family,” Barclay’s Meyer said.
Another increase in single-family starts would add to signs the housing slump is nearing a bottom. Combined sales of existing and new homes climbed to a 5.1 million annual pace in May, the highest level so far this year. The Mortgage Bankers Association’s purchase applications index averaged 3 payday loan.2 percent higher in June than in the prior month.
Even so, Federal Reserve officials last month saw a danger of a renewed decline in the housing market, partly as mortgage rates increased.
“Indicators of single-family starts and sales suggested that housing activity may be leveling out, but most participants viewed the sector as still vulnerable to further weakness,” the central bank said in minutes of the Federal Open Market Committee’s June 23-24 meeting released this week.
Rates Fall
Borrowing costs have retreated once again since the Fed’s meeting. The rate on a 30-year fixed loan fell to 5.14 percent in the week ended yesterday, the lowest level in almost two months, according to figures from Freddie Mac. The rate reached a record low of 4.78 percent in late April.
The Fed minutes also showed some policy makers were concerned over the continuing “high rate” of foreclosures, fearing it would push down prices further by adding to inventories of unsold homes.
Home foreclosures rose 33.2 percent in June from a year earlier, RealtyTrac Inc. said yesterday. A record 1.5 million properties received a default or auction notice or were seized by banks in the first half of the year.
A report yesterday showed gains in sales and buyer traffic were helping make builders less pessimistic about the industry. The National Association of Home Builders/Wells Fargo index of builder confidence gained to 17 this month, the highest level since September, the Washington-based NAHB said. A reading below 50 means most respondents view conditions as poor.
Stable Sales
New-home sales likely will be little changed in coming months because of low consumer confidence and the difficulty would-be buyers have getting loans, Pulte Homes Inc. Chief Executive Officer Richard Dugas said at an investor conference June 23.