Housing starts in the U.S. hovered in February near a three-year high and building permits rose, adding to signs that the industry at the heart of the last financial crisis is stabilizing.
Builders broke ground on 698,000 homes at an annual rate, in line with the median forecast of economists surveyed by Bloomberg News and down 1.1 percent from a January pace that was stronger than previously reported, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, climbed to the highest level since October 2008.
Gains in homebuilding are benefitting construction-material suppliers like Owens Corning Inc. (OC) as the industry heals following the worst slump on record. The jump in applications is a reflection of growing confidence that indicates housing will no longer hold back the economic expansion.
“The housing market continues to recover at a very gradual rate,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, who forecast a 697,000 pace for housing starts. “The increase in permits likely flags further strength in the months ahead.”
Stocks fell as commodities slumped on concern about an economic slowdown in China. The Standard & Poor’s 500 Index dropped 0.3 percent to 1,405.52 at the close in New York.
The median estimate in a Bloomberg survey of 80 economists called for a rise to 700,000. Estimates ranged from 650,000 to 775,000. The prior month was revised up to 706,000, the highest since October 2008, from a 699,000 pace.
Permits (NHSPATOT) increased to a 717,000 annual pace, the most since October 2008, today’s report showed. They were projected to rise to a 686,000 annual rate, from 682,000 the prior month, according to the survey median.
The pace of homebuilding last month was led by a jump in multifamily construction that indicates demand for rental housing is increasing.
Work on multifamily homes, including townhouses and apartment buildings, last month advanced 21 percent to an annual rate of 241,000. Construction of single-family houses fell 9.9 percent, the biggest drop in a year, to a 457,000 rate.
Both categories saw permits increase last month, indicating the drop in single-family activity will be short-lived.
Combined sales of new and existing homes climbed in January to the highest level in more than a year. They probably kept improving last month.
Demand for previously owned houses advanced in February to the highest level since May 2010, according to the median forecast of economists surveyed by Bloomberg before a report tomorrow from the National Association of Realtors. Two days later, figures from the Commerce Department will show purchases of new homes increased to the highest level since December 2010, according to the Bloomberg survey.
Building materials-makers like Owens Corning are among companies benefiting as housing stabilizes.
“We have the wind at our back as the economy recovers and housing improves,” Sheree Bargabos, president of roofing and asphalt at the Toledo, Ohio-based company, said on a March 9 conference call. “Growth is anticipated as the housing market recovers, driven by home affordability, improving home values and home remodeling activity.”
Paul Hylbert, chairman of Kodiak Building Partners in Denver, Colorado, a building materials supplier, said “business is definitely picking up. We are on the road to recovery.” Nonetheless, “we will see some fits and starts,” he said in an interview last month. Sales were up 44 percent in December from a year earlier and 60 percent in January, Hylbert said.
The February homebuilding data compare with 608,800 housing starts last year, up from 586,900 in 2010 and reflecting gains in multifamily construction. The 554,000 housing units begun in 2009 were 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.
Two of four regions showed a decrease in February starts, led by a 12 percent drop in the Northeast. In the West, construction fell 5.9 percent. Homebuilding climbed 3 percent in the Midwest and 1.5 percent in the South.
Optimism among homebuilders has been improving in recent months. The National Association of Home Builders/Wells Fargo index of builder confidence held in March at the highest level since June 2007 as sales expectations climbed for a sixth month, figures showed yesterday.
The average 30-year fixed-rate mortgage reached an all-time low of 3.87 percent in February, according to data from Freddie Mac.
A measure of housing affordability a month earlier climbed to a record 206.1, according to the National Association of Realtors. A value of 100 means a family earning the national median income can afford a median-priced property at current mortgage rates.
Federal Reserve policy makers last week said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist and aimed at bringing down borrowing costs like mortgage rates.
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