U.S. Housing Starts Probably Fell in February to a Record Low
U.S. builders probably broke ground in February on the fewest houses on record as the worst real- estate slump in 70 years deepened, economists said before a government report today.
Housing starts dropped 3.4 percent to an annual rate of 450,000, according to the median forecast of 71 economists in a Bloomberg News survey. A separate report may show wholesale prices rose in February for a second month on higher fuel costs.
Record foreclosures are flooding already glutted markets, lowering home prices and battering builders including Hovnanian Enterprises Inc. and Toll Brothers Inc. The Federal Reserve, which meets today and tomorrow, and the Obama administration are under mounting pressure to promptly thaw credit markets and prevent the economy from sinking even more.
“The impediment of tighter credit and the lack of consumer confidence because of higher unemployment are working against builders,” said Jonathan Basile, an economist at Credit Suisse Holdings USA Inc. in New York. “There’s no quick fix. Residential investment will keep declining through this year.”
The Commerce Department’s report on housing starts is due at 8:30 a.m. in Washington. Estimates in the survey ranged from 400,000 to 500,000, following a January pace of 466,000.
Building permits, a sign of future construction, likely fell to a record-low 500,000 annual pace, according to the median forecast.
Wholesale Prices
Also at 8:30 a.m., the Labor Department may report the producer price index climbed 0.4 percent in February after a 0.8 percent increase the prior month, the survey showed. Prices excluding food and fuel probably rose 0.1 percent, the smallest gain since November, indicating inflation is a distant concern for the central bank.
Fed policy makers will keep the benchmark interest rate close to zero following their two-day meeting and discuss additional measures to calm the credit crisis, economists said.
Fed Chairman Ben S. Bernanke and his colleagues are examining whether to expand existing asset-purchase and lending programs or initiate fresh measures, such as buying Treasuries free credit report and score. The central bank also is purchasing Fannie Mae, Freddie Mac and Federal Home Loan Bank debt under a program aimed to reduce mortgage costs.
Reflecting the dismal outlook for homebuilding, the National Association of Home Builders/Wells Fargo’s index of confidence held near a record-low in March, the group reported yesterday.
Unclog Credit
Banks need to “go the extra mile” and keep credit flowing to businesses to prevent the economy from worsening, Treasury Secretary Timothy Geithner said in remarks at the White House yesterday. The economy has lost 4.4 million jobs since the recession began in December 2007.
President Barack Obama has pledged a $275 billion rescue to help keep as many as 9 million borrowers in their homes and reduce foreclosures. His efforts also include a tax break of up to $8,000 for first-time homebuyers that wouldn’t require repayment.
For now, mortgage borrowers are hard-pressed. Foreclosure filings climbed 30 percent in February from a year earlier, and a total of 290,631 homes received a default or auction notice or were seized by the lender, according to RealtyTrac Inc., an Irvine, California-based seller of default data.
The competition from foreclosed houses is hurting developers. Toll, the largest U.S. builder of luxury homes, this month reported its sixth consecutive quarterly loss while Hovnanian, New Jersey’s largest homebuilder, had a 10th straight loss.
“We expect demand for all homes, both new and existing, to remain far below normalized levels,” Chief Executive Officer Ara Hovnanian said in a March 10 statement. He urged for more government help for homebuyers, citing a “difficult economic backdrop.”