Bloomberg News

Home Construction Starts in U.S. Probably Climbed in February

March 19, 2013

New residential construction probably increased in February, pointing to more progress in the housing industry that’s helping power the U.S. expansion, economists said before a report today.

Builders broke ground on 915,000 houses at an annual rate, up from an 890,000 pace in January and the second-highest since mid-2008, according to the median estimate of 81 economists surveyed by Bloomberg. Building permits, a proxy for future construction, may have advanced to an almost five-year high.

Confidence is being restored to the housing market as property values stabilize, the employment outlook brightens and mortgage rates hover around record lows. An easing of bank lending conditions would help bring home ownership within reach of more Americans and stoke bigger gains in home construction.

“The housing sector looks like it’s really turning,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “There’s a lot of room for anything housing related to give the economy a real boost.”

The housing starts figures are due from the Commerce Department at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 872,000 to 1 million. Building permits climbed to a 925,000 annual rate, the most since June 2008, from 904,000 in January, according to the survey median.

Pulte, Lennar

Limited inventories and resilient sales are driving orders at builders such as PulteGroup Inc. (PHM:US) and Lennar Corp. (LEN:US) At the same time, lenders have imposed stricter standards on mortgages, an artifact of the subprime collapse that pushed the U.S. economy into its last recession, said Ara Hovnanian, chairman and chief executive officer of builder Hovnanian Enterprises Inc. (HOV:US) in Red Bank, New Jersey.

“On the whole, we’re still seeing definitely stricter guidelines,” Hovnanian said on a March 6 earnings call. “Eventually, the pendulum, which has swung to the overcorrection mode in terms of difficult qualification because of what happened with subprime, that pendulum will come back to the middle and that should add a further boost to the housing recovery a little later in the cycle.”

Homebuilder shares have outperformed the broader market. The Standard & Poor’s Supercomposite Homebuilding Index has surged 62.6 percent in the past year, compared with a 10 percent gain in the S&P 500.

Last Year

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 improvement, housing starts remain short of the 2.07 million in 2005, a three-decade high reached at the peak of the boom.

Residential construction has added to economic growth since the second quarter of 2011. The gains in homebuilding filter through to other parts of the economy as well -- from appliance makers such as Whirlpool Corp. (WHR:US) to retailers including home- improvement store Lowe’s Cos.

Rising home prices are prompting consumers to spend a bit more freely, Lowe’s Chairman and Chief Executive Officer Robert Niblock said.

“Consumers feel much better when it comes to discretionary spending, about spending on their home, if they believe the value is going up,” Niblock said on a Feb. 25 earnings call. “I call it the psychological permission to spend it and feel good about it.”

“The housing metrics are definitely moving in the right direction,” he said.

Federal Reserve

Monetary policy stimulus from the Federal Reserve has helped drive down mortgage costs and spurred the recovery in housing. Fed officials wrap up a two-day meeting tomorrow and they will probably agree to continue record asset purchases aimed at ensuring the expansion is sustained.

Cheaper borrowing costs are attracting buyers able to qualify for loans. The average rate on a 30-year, fixed-rate purchase loan was 3.63 percent last week, compared with 3.92 percent a year ago, according to McLean, Virginia-based Freddie Mac. The 30-year rate reached a record low of 3.31 percent in November.

Builder sentiment paused in March, a report showed yesterday. The National Association of Home Builders/Wells Fargo confidence index dropped by 2 points to 44. Readings below 50 mean more respondents said conditions were poor.

The group’s gauges of the sales outlook and customer traffic improved, according to the report, while an index of present single-family home sales fell to a five-month low.

                   Bloomberg Survey

================================================================
                           Housing  Housing Building Building
                            Starts   Starts  Permits  Permits
                            ,000’s     MOM%   ,000’s     MOM%
================================================================

Date of Release              03/19    03/19    03/19    03/19
Observation Period            Feb.     Feb.     Feb.     Feb.
----------------------------------------------------------------
Median                         915     2.8%      925     2.3%
Average                        918     3.2%      927     2.5%
High Forecast                 1000    12.4%     1000    10.6%
Low Forecast                   872    -2.0%      900    -0.4%
Number of Participants          81       81       55       55
Previous                       890    -8.5%      904    -0.6%
----------------------------------------------------------------
4CAST                          930     4.5%      930     2.9%
ABN Amro                       917     3.0%     ---
Action Economics               910     2.3%      920     1.8%
Ameriprise Financial           915     2.8%      920     1.8%
Bank of the West               915     2.8%      920     1.8%
Bank of Tokyo-Mitsubishi       925     3.9%     ---
Bantleon Bank AG               930     4.5%      930     2.9%
Barclays                       905     1.7%     ---
Bayerische Landesbank          950     6.7%     ---
BBVA                           918     3.2%      926     2.4%
BMO Capital Markets            917     3.0%      922     2.0%
BNP Paribas                    940     5.6%     ---
BofA Merrill Lynch             915     2.8%      920     1.8%
Briefing.com                   905     1.7%      915     1.2%
Capital Economics              910     2.3%     ---
CIBC World Markets             898     0.9%      920     1.8%
Citi                           940     5.6%      930     2.9%
ClearView Economics            940     5.6%      950     5.1%
Commerzbank AG                 880    -1.1%      910     0.7%
Credit Agricole CIB            925     3.9%      920     1.8%
Credit Suisse                  920     3.4%      930     2.9%
Daiwa Securities America       910     2.3%     ---
Danske Bank A/S                908     2.0%      918     1.6%
DekaBank                       930     4.5%      930     2.9%
Desjardins Group               912     2.5%      925     2.3%
Deutsche Bank Securities       900     1.1%      910     0.7%
Deutsche Postbank AG           910     2.3%     ---
First Trust Advisors           922     3.6%     ---
FTN Financial                  922     3.6%      937     3.7%
Goldman, Sachs & Co.           935     5.0%     ---
Hammer Partners SA             925     3.9%     ---
Helaba                         930     4.5%      905     0.1%
High Frequency Economics       905     1.7%      925     2.3%
HSBC Markets                   932     4.7%      916     1.3%
Hugh Johnson Advisors          894     0.5%     ---
IDEAglobal                     910     2.3%      925     2.3%
IHS Global Insight             902     1.4%      922     2.0%
Informa Global Markets         910     2.3%      900    -0.4%
Intesa Sanpaolo                925     3.9%      930     2.9%
J.P. Morgan Chase              900     1.1%      930     2.9%
Janney Montgomery Scott        893     0.3%      918     1.6%
Jefferies                      925     3.9%      910     0.7%
John Hancock                   910     2.3%      917     1.4%
Landesbank Berlin              960     7.9%      970     7.3%
Landesbank BW                  950     6.7%      920     1.8%
Lloyds Tsb Bank                924     3.8%      932     3.1%
Maria Fiorini Ramirez          905     1.7%     ---
Market Securities              925     3.9%     ---
MET Capital Advisors           905     1.7%     ---
Modal Asset                    899     1.0%     ---
Moody’s Analytics              940     5.6%      930     2.9%
Morgan Stanley & Co.           920     3.4%     ---
National Bank Financial        925     3.9%      935     3.4%
Natixis                        921     3.5%     ---
Nomura Securities              915     2.8%      935     3.4%
OSK Group/DMG                  910     2.3%     ---
Oxford Economics               901     1.2%      924     2.2%
Pantheon Macroeconomic         900     1.1%      920     1.8%
Pierpont Securities            920     3.4%     ---
PNC Bank                       935     5.1%     ---
Prestige Economics            1000    12.4%     1000    10.6%
Raiffeisenbank International   975     9.6%      975     7.9%
Raymond James                  930     4.5%      925     2.3%
RBC Capital Markets            915     2.8%     ---
RBS Securities                 920     3.4%     ---
Regions Financial              930     4.5%      960     6.2%
Renaissance Macro Research     910     2.3%      915     1.2%
Santander                      918     3.2%     ---
Scotiabank                     900     1.1%     ---
SMBC Nikko Securities          900     1.1%      915     1.2%
Societe Generale               970     9.0%      950     5.1%
Standard Chartered Bank        910     2.3%      930     2.9%
Stone & McCarthy               915     2.8%      925     2.3%
TD Securities                  900     1.1%      905     0.1%
UBS                            925     3.9%      930     2.9%
UniCredit Research             915     2.8%      925     2.3%
Union Investment               900     1.1%      930     2.9%
University of Maryland         910     2.3%      920     1.8%
Wells Fargo & Co.              910     2.3%     ---
Westpac Banking Co.            872    -2.0%      922     2.0%
Wrightson ICAP                 895     0.6%      910     0.7%
================================================================

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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


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Companies Mentioned

  • PHM
    (PulteGroup Inc)
    • $18.82 USD
    • -0.26
    • -1.38%
  • LEN
    (Lennar Corp)
    • $41.03 USD
    • -0.35
    • -0.85%
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