Bloomberg News

New U.S. Housing Construction Exceeds Forecast in January

February 17, 2012

(Updates with economist’s comment in fourth paragraph.)

Feb. 16 (Bloomberg) -- Builders broke ground on more homes than forecast in January, helped by warmer weather and adding to signs the U.S. residential real estate market is stabilizing.

Starts rose 1.5 percent to a 699,000 annual rate from December’s 689,000 pace that was stronger than previously reported, Commerce Department figures showed today in Washington. The median estimate in a Bloomberg News survey called for a rise to 675,000. Building permits, a proxy for future construction, also climbed.

Beazer Homes USA Inc. and D.R. Horton Inc. are among builders reporting more orders as a pickup in hiring, cheaper properties and borrowing costs close to a record low attract buyers. At the same time, the glut of foreclosed houses remains a restraint on construction, one reason the Obama administration and the Federal Reserve are taking steps to bolster the industry.

“The numbers are genuinely getting better,” said Brian Jones, senior U.S. economist at Societe Generale in New York, who projected a rate of 700,000 starts. Multifamily home construction “has a ways to run. We should be seeing a pop in single-family starts by late spring.”

Estimates of the 80 economists surveyed by Bloomberg ranged from 640,000 to 736,000. The prior month was revised from a 657,000 pace.

Jobless Claims

Jobless claims unexpectedly fell last week to the lowest level in four years, a report from the Labor Department showed today. First-time applications for unemployment benefits decreased 13,000 in the week ended Feb. 11 to 348,000, the fewest since March 2008.

Stock-index futures trimmed losses after the reports. The contract on the Standard & Poor’s 500 Index expiring next month dropped 0.1 percent to 1,340.7 at 8:44 a.m. in New York after losing as much as 0.6 percent earlier.

Construction of multifamily units such as apartment buildings led the January gain. Starts of single-family homes eased after surging in December for a third month.

The fourth-warmest January on record probably gave homebuilding a boost, economists said. The National Oceanic and Atmospheric Administration reported the average temperature was 36.3 degrees Fahrenheit (2.39 Celsius), 5.5 degrees above the 1901-2000 long-term average.

Last Year

The January homebuilding data compare with 609,200 housing starts last year, up from 587,000 in 2010 and reflecting gains in multifamily construction. They totaled 554,000 units in 2009, the fewest since record-keeping began in 1959. During the past decade’s housing boom, starts reached a peak of 2.07 million in 2005.

Permits increased to a 676,000 annual pace, today’s report showed. They were projected to rise to a 680,000 annual rate, from 671,000 the prior month, according to the survey median.

Construction of single-family houses fell 1 percent to a 508,000 rate after jumping 12 percent in December to a 513,000 pace.

Work on multifamily homes that include townhouses and apartment buildings last month climbed 8.5 percent to an annual rate of 191,000 after a 28 percent slump in December.

Three of four regions had an increase in January starts, led by the South and West. In the South, construction jumped 18 percent to a 388,000 annual rate, the fastest since October 2008. Starts in the West increased 12 percent. The Midwest posted a 41 percent drop, led by fewer starts of single-family dwellings.

Beazer Homes Orders

Beazer Homes said orders jumped 36 percent in the final three months of 2011 from the same quarter a year earlier, and closings on new houses surged more than 60 percent. The Atlanta- based builder said it expects to sell more properties this year than last.

“While our visibility into the economic conditions for the remainder of the year is limited, I believe that we will benefit from a gradually improving housing market,” Allan Merrill, chief executive officer, said on an earnings call on Feb. 2.

D.R. Horton, the largest U.S. homebuilder by volume, reported net home orders rose to 3,794 in final three months of 2011, from 3,363 a year earlier.

“Simply put, our business feels more positive,” Donald Tomnitz, chief executive officer of the Fort Worth, Texas-based company, said in a Jan. 27 conference call. “We are cautiously optimistic for the remainder for 2012.”

The National Association of Home Builders/Wells Fargo index of builder confidence climbed in February to the highest level since May 2007, figures showed yesterday.

More Foreclosures

Builders still have to contend with a stream of distressed houses returning to the market and limiting prices. Fed Chairman Ben S. Bernanke said the central bank’s efforts to spur economic growth are being blunted by impediments to mortgage lending, and called for more steps to heal the housing industry.

“We have helped lower mortgage rates to the lowest point in many, many decades,” Bernanke told homebuilders on Feb. 10 in Orlando, Florida. “Yet we are not seeing as much activity as we would like to see.”

Bank of America Corp., JPMorgan Chase & Co. and three other U.S. banks reached a $25 billion settlement with 49 states and the U.S. government to end a probe of abusive foreclosure practices prompted by the collapse of the housing price bubble. President Barack Obama said the agreement, announced Feb. 9, is a “major step” in reviving housing.

--With assistance from Chris Middleton in Washington. Editor: Vince Golle

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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