Housing Starts Update
Sept. 17 (Bloomberg) — Builders in the U.S. broke ground on fewer single-family homes last month as the expiration of the government’s tax credit for first-time buyers approached.
Single-family projects dropped 3 percent, the first decrease since January, while work began on 25 percent more multifamily units such as apartments, figures from the Commerce Department showed today in Washington. Totalhousing starts rose 1.5 percent to an annual rate of 598,000, the highest level in nine months and matching economists’ expectations.
Builders may be reluctant to further increase the supply of homes amid uncertainty over whether the Obama administration’s $8,000 tax credit for first-time buyers will be extended beyond November, economists said. The incentive, plus foreclosure-driven declines in prices, has helped stabilize the housing market in recent months following the biggest slump since the Great Depression.
“We may be in for a period of consolidation, given the apparent end of the tax credit” said Stephen Stanley, chief economist at RBS Securities Inc. in Stamford, Connecticut. “We’re certainly going to see, over time, housing starts rise.”
A separate report today from the Labor Department showed the number of Americans filing first-time claims for jobless benefits fell unexpectedly last week, a sign the labor market is deteriorating at a slower pace as the economy pulls out of the recession.
Applications dropped by 12,000 to 545,000 in the week ended Sept. 12, from a revised 557,000 the week before. The total number of people collecting unemployment insurance rose the prior week.
Stocks fluctuated, a day after the Standard & Poor’s 500 Index climbed to an 11-month high, as disappointing sales at Oracle Corp. and FedEx Corp. offset the decrease in jobless claims. The S&P 500 was up 0.5 percent to 1,073.83 as of 10 a.m. in New York.
Starts were projected to rise to a 598,000 annual pace from a 581,000 rate initially reported for July, according to the median forecast of 74 economistssurveyed by Bloomberg News. Estimates ranged from 570,000 to 640,000.
Permits, a sign of future construction, climbed 2.7 percent to a 579,000 annual rate in August, also led by an increase in multifamily. They were projected to rise to 583,000, economists forecast.
Construction of single-family houses, which account for about 85 percent of the industry, fell to a 479,000 rate, the first decline since January. Work on multi-family units, which makes up the rest of the market and is often volatile, jumped to a 119,000 rate.
Gains in Northeast
The increase in starts was led by a 24 percent increase in the Northeast. They rose 0.9 percent in the Midwest, and fell 2.4 percent in the South. The West was little changed.
Volatility in multifamily projects has obscured the underlying improvement in residential building. Construction of apartments and condominiums surged 56 percent in May only to slump by 21 percent and 15 percent the next two months.
Americans are taking advantage of the Obama administration’s $8,000 tax credits for first-time buyers that expires at the end of November. Those with jobs, cash to make down payments and good credit scores are picking up bargains as record foreclosures have driven down home prices by about 32 percent from their peaks in mid-2006, according to the S&P/Case- Shiller index.
Home Sales Rise
Combined sales of new and existing homes rose in the four months though July.
A report yesterday showed gains in sales and buyer traffic pushed builder confidence this month to its highest level since May 2008.
Luxury builder Toll Brothers Inc. is among companies that see demand improving, even as losses mount.
“In the last six months, we see a pretty significant change in some markets,” Chief Executive Officer Robert Toll said in an interview Aug. 27 with Bloomberg Television. “People are now concerned with missing the market.”
The expiration of the tax credit for first time buyers may result in a downdraft for sales and construction, Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. The housing market is unlikely to recover fully until the unemployment rate stops rising and the economy begins creating jobs, he said before the report.