U.S. Housing Starts Drop to Lowest Level Since April 2009
Wednesday, March 16, 2011; 10:01 AM
March 16 (Bloomberg) -- Housing starts in the U.S. declined more than forecast in February to the slowest pace since April 2009 and building permits slumped to a record low, signs the housing market recovery is limping along as the rest of the economy improves.
Beginning home construction fell 22.5 percent to a 479,000 annual rate, with declines in all regions, Commerce Department figures showed today in Washington. The decrease from January was the biggest since March 1984. The median forecast in a Bloomberg News survey called for a 566,000 rate. Building permits, a proxy for future construction, fell 8.2 percent to a 517,000 pace.
Foreclosed homes that have driven down prices and added to inventories, along with limited job growth, are restraining new construction. Federal Reserve policy makers said yesterday the housing market "continues to be depressed," as they maintained plans to purchase Treasury securities to boost economic growth.
"At this point new homes are likely to continue to lose to existing homes because distressed properties pose a better bargain for buyers," said Millan Mulraine, senior U.S. strategist at TD Securities in New York. "We're not seeing a strong rebound in the horizon because permit approval is just marginally above starts."
Stock-index futures erased gains after the report. Contracts on the Standard & Poor's 500 Index expiring in June dropped less than 0.1 percent to 1,274.8 at 8:33 a.m. in New York. Treasuries were little changed with the yield on the benchmark 10-year note at 3.30 percent.
Wholesale costs in the U.S. rose more than forecast in February, led by the biggest gain in food since 1974 and a surge in energy prices, Labor Department figures showed today. The producer-price index climbed 1.6 percent, the most since June 2009. Core producer prices, which exclude food and fuel, rose 0.2 percent, less than half the 0.5 percent gain in January.
Housing starts estimates ranged from 537,000 to 638,000 in the Bloomberg News survey of 74 economists. January's pace was revised to 618,000 from a previous estimate of 596,000.
Permits declined by 28 percent in the Northeast to the lowest on record and by 14 percent to an all-time low in the West.
Construction of single-family houses decreased 12 percent to a 375,000 rate in February, the slowest since March 2009, from the prior month. Work on multifamily homes, such as townhouses and apartments, slumped 46 percent to an annual rate of 104,000.
Starts in fell in all four regions, led by a 49 percent drop in the Midwest to a record low. Starts declined 38 percent in the Northeast, 28 percent in the West and 6.3 percent in the South.
Fed Chairman Ben S. Bernanke said during his testimony to Congress this month that the housing sector "remains weak" even with "some grounds for optimism" in the economy.
"Many potential home buyers are finding mortgages difficult to obtain and are also worried about additional declines in house prices," Bernanke told lawmakers March 2.