Bloomberg News

Home Construction in U.S. Probably Cooled From Four-Year High

February 20, 2013

Home Construction in U.S. Probably Cooled From Four-Year High

Builders broke ground on houses at a 920,000 annual rate, down from December’s 954,000 pace that was the fastest since June 2008. Photographer: David Paul Morris/Bloomberg

New residential construction in the U.S. probably cooled in January from a four-year high, signaling the industry’s momentum paused at the start of 2013, economists said before a report today.

Builders broke ground on houses at a 920,000 annual rate, down from December’s 954,000 pace that was the fastest since June 2008, according to the median estimate of 85 economists surveyed by Bloomberg. Housing permits, a proxy for future construction, probably rose.

Faster hiring and easier access to credit are needed to help complement historically low mortgage rates and stoke a sustained real-estate rebound. Rising sales at builders such as PulteGroup Inc. (PHM:US) and Lennar Corp. (LEN:US) indicate housing will keep contributing to growth this year after having emerged as a bright spot in the economy in 2012.

“It’s a moderate recovery,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, the largest U.S. mortgage lender. “We’re seeing some month-to-month volatility. Housing is getting better.”

The housing report is due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 870,000 to 1 million. Building permits may have climbed in January to a 920,000 annual rate, the highest since July 2008, according to the survey median.

Producer Prices

Also at 8:30 a.m., Labor Department data may show wholesale prices advanced 0.3 percent in January, the first rise in four months, according to the Bloomberg survey median. The so-called core producer price index, which excludes food and fuel costs, rose 1.7 percent from January 2012, the smallest year-over-year gain in two years and a sign inflation is contained, economists projected.

Few price pressures mean Federal Reserve officials have room to hold down borrowing costs, minutes of their Jan. 29-30 meeting may show today. The details may shed light on the debate among policy makers on how long to continue their bond buying effort, designed to foster economic growth and cut 7.9 percent unemployment.

The Fed’s steps to keep mortgage costs low have helped bring about a turnaround in housing, the industry that was at the center of the financial crisis. For all of last year, builders began work on 780,000 homes, a 28 percent increase from 2011 and the third straight annual gain. Even with the yearly improvement, housing starts remain short of the 2.07 million in 2005 at the peak of the boom, which was three-decade high.

Builder Sentiment

Sentiment in the industry leveled off this month from a more than six-year high, figures showed yesterday. The National Association of Home Builders/Wells Fargo index of builder confidence fell to 46 from the prior month’s 47 that matched the highest reading since April 2006.

Company results indicate the improvement in residential real estate will continue. PulteGroup, Lennar and D.R. Horton Inc., the top three U.S. homebuilders by market value, said orders rose (PHM:US) in the most recently reported quarter.

“The combination of incredibly low mortgage rates, continued increases in rental rates and especially rising home prices, and very low -- and likely to stay low -- inventory levels for housing lead us to believe that 2013 will be a better year for U.S. housing than 2012,” Richard Dugas, chief executive officer of Bloomfield Hills, Michigan-based PulteGroup, said on a Jan. 31 earnings call.

The Standard & Poor’s Supercomposite Homebuilding Index has surged 68.5 percent in the 12 months to Feb. 19, outpacing a 12.5 percent gain in the broader S&P 500.

Prime Season

Builders are now gearing up for the spring selling season, traditionally viewed as starting the weekend after the National Football League’s Super Bowl, an event held Feb. 3.

Declining mortgage costs have made it cheaper to buy a home for those who qualify for credit. The average fixed rate on a 30-year loan held at 3.53 percent in the week ended Feb. 14, down from 3.87 percent a year ago, figures from McLean, Virginia-based Freddie Mac showed.

Increased household formation is also encouraging builders to diversify into construction of apartments. Miami-based Lennar in January said it plans to construct $1 billion of multifamily properties, while Toll Brothers Inc. (TOL:US), the largest U.S. luxury- home builder, said it will begin development of high-end college dormitories.

To contact the reporter on this story: Shobhana Chandra in Washington at

To contact the editor responsible for this story: Christopher Wellisz at

The Good Business Issue

Companies Mentioned

  • PHM
    (PulteGroup Inc)
    • $20.96 USD
    • 0.02
    • 0.1%
  • LEN
    (Lennar Corp)
    • $43.37 USD
    • -0.01
    • -0.02%
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