Bloomberg News

Housing Starts in U.S. Probably Climbed in June

July 18, 2012

Housing Starts in U.S. Rose in June to Highest Level Since 2008

A construction crew works on a new home in the PulteGroup Inc. development of Villa Trieste in Las Vegas. Photographer: Ronda Churchill/Bloomberg

Builders probably broke ground on U.S. homes in June at the fastest pace in almost four years, indicating the outlook for residential real estate is brightening, economists said before a report today.

Housing starts rose 5.2 percent last month to a 745,000 annual pace, the strongest since October 2008, according to the median estimate of 79 economists surveyed by Bloomberg News. Building permits, a proxy for future construction, dropped 2.4 percent to a 765,000 rate, the survey showed.

Record-low mortgage rates and cheaper properties are attracting buyers, encouraging builders faced with lean inventories to boost construction. At the same time, limited employment opportunities and competition from distressed properties are hurdles for the industry.

“The long-awaited housing market recovery is definitely under way as demand is improving,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “Continued growth in the number of households, pent-up demand, very low prices and mortgage rates that have resulted in record- high affordability” are underpinning demand, he said.

The housing starts figures are due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey for June ranged from 710,000 to 800,000.

A report yesterday showed confidence among U.S. homebuilders climbed in July by the most since September 2002. The National Association of Home Builders/Wells Fargo index of sentiment increased by 6 points to 35 this month as sales and buyer traffic improvement.

Fed’s Bernanke

Federal Reserve Chairman Ben S. Bernanke, in testimony yesterday to Congress, indicated the industry was on the mend.

Growth in construction and “historically low mortgage rates” are among “modest signs” of a housing recovery, even as buyers show concern about personal finances and the broader economy and have difficulty meeting lending standards, Bernanke said.

The average 30-year, fixed mortgage rate declined to 3.56 percent last week, the lowest in data going back to 1972, according to McLean, Virginia-based Freddie Mac.

“Evidence from the field suggests that the ‘for sale’ housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process,” Stuart Miller, chief executive officer at Lennar Corp., the third-largest U.S. homebuilder by revenue, said in a June 27 statement.

The Standard & Poor’s Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and PulteGroup Inc., has climbed 52 percent this year, outpacing an 8.4 percent gain in the broader S&P 500 Index.

‘Improvement Everywhere’

“We are seeing different improvements in different parts of the country, but we’re seeing improvement everywhere,” Larry Nicholson, president and chief executive officer at West Lake Village, California-based builder Ryland Group Inc., said on a June 13 conference call. “So that’s the key there.”

Home prices are stabilizing and starting to increase. The S&P/Case-Shiller index of property values adjusted for seasonal variations rose 0.7 percent in April, the third straight gain. A pickup in home sales may help spur gains in building materials.

“As we start to move prices up, it starts to draw people off the sidelines who are potential homebuyers, people that are at the age they should be buying a house, but they’ve been concerned about a further decline in prices,” Daniel Fulton, chairman and chief executive officer of forest-products company Weyerhaeuser Co. (WY:US), said at a June 13 conference. “So we’re starting to see some increase in activity.”

At the same time, foreclosures are hindering the housing rebound. Initial notices, the start of the process, jumped 6 percent in the second quarter from a year earlier, the first annual increase since 2009, according to RealtyTrac Inc., a real estate data provider in Irvine, California.

The increase may reflect February’s $25 billion settlement among 49 state attorneys general and the five major mortgage servicers for improper and fraudulent paperwork related to foreclosures, according to a Bloomberg Government study. The pace of foreclosures had slowed for at least a year while the settlement was being resolved.

                Bloomberg Survey
==============================================
                           Housing Building
                            Starts  Permits
                            ,000’s   ,000’s
==============================================
Date of Release              07/18    07/18
Observation Period            June     June
----------------------------------------------
Median                         745      765
Average                        744      768
High Forecast                  800      850
Low Forecast                   710      735
Number of Participants          79       51
Previous                       708      784
----------------------------------------------
4CAST Ltd.                     770      770
ABN Amro Inc.                  744     ---
Action Economics               735      745
Ameriprise Financial Inc       735      768
Analytical Synthesis           732      765
Banca Aletti & C spa           730      760
Bantleon Bank AG               760      775
Barclays                       745     ---
BBVA                           720      750
BMO Capital Markets            750     ---
BNP Paribas                    750     ---
BofA Merrill Lynch Resear      740      745
Briefing.com                   715      765
Capital Economics              780     ---
CIBC World Markets             740      740
Citi                           740      795
ClearView Economics            720      750
Comerica Inc                   740     ---
Commerzbank AG                 730      760
Credit Agricole CIB            745      795
Credit Suisse                  760      750
Daiwa Securities America       720     ---
Danske Bank                    764     ---
Desjardins Group               750      740
Deutsche Bank Securities       725      760
Deutsche Postbank AG           760     ---
DZ Bank                        765      735
Exane                          738     ---
Fact & Opinion Economics       750     ---
First Trust Advisors           745     ---
FTN Financial                  755      775
Goldman, Sachs & Co.           744     ---
Helaba                         750      750
High Frequency Economics       760      775
HSBC Markets                   735      755
Hugh Johnson Advisors          720     ---
IDEAglobal                     730      775
IHS Global Insight             752      780
Informa Global Markets         720      740
ING Financial Markets          756      762
Insight Economics              750     ---
Intesa Sanpaulo                730      765
J.P. Morgan Chase              750      785
Janney Montgomery Scott L      720      800
Jefferies & Co.                745      760
John Hancock Financial         722      784
Landesbank Berlin              740      750
Landesbank BW                  750      770
Lloyds Bank Wbm                750      765
Maria Fiorini Ramirez Inc      745     ---
Market Securities              755     ---
MET Capital Advisors           710     ---
Mizuho Securities              722     ---
Moody’s Analytics              755      770
Morgan Stanley & Co.           725     ---
National Bank Financial        740      765
Natixis                        735     ---
Nomura Securities Intl.        732      804
Nord/LB                        730      770
OSK Group/DMG                  755     ---
Pierpont Securities LLC        760     ---
PNC Bank                       750     ---
Raiffeisenbank Internatio      790      800
Raymond James                  745      800
RBC Capital Markets            732     ---
RBS Securities Inc.            745     ---
Scotiabank                     750     ---
SMBC Nikko Securities          745      750
Societe Generale               800      850
Standard Chartered             745      760
Stone & McCarthy Research      750      765
TD Securities                  750      760
UBS                            770      775
UniCredit Research             750      750
Union Investment               730      780
University of Maryland         740      750
Wells Fargo & Co.              749     ---
Westpac Banking Co.            729      761
Wrightson ICAP                 760      790
==================================================

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

A construction crew works on a new home in the PulteGroup Inc. development of Villa Trieste in Las Vegas. Photographer: Ronda Churchill/Bloomberg July 17 (Bloomberg) -- Drew Matus, managing director and senior U.S. economist at UBS Securities LLC., is expecting the economy to accelerate in the second half of the year, though not enough to be in a full recovery. Matus talks with Bloomberg's Ken Prewitt on Bloomberg Radio's "Bloomberg - The First Word." (Source: Bloomberg)

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