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Home - Top News
October 19, 2011 8:59 AM

U.S. Housing Starts Climbed More Than Forecast in September

Oct. 19 (Bloomberg) -- Builders began work on more U.S. homes than forecast in September on rising demand for apartments and condominiums as more Americans become renters.

Housing starts climbed 15 percent to 658,000 houses at an annual rate, the most since April 2010, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey called for a 590,000 pace. Beginning construction of multifamily dwellings surged to the highest since October 2008.

Building permits, a proxy for future construction, declined to a five-month low, indicating foreclosures that are adding to the supply of unsold homes and depressing property values may continue to hold back developers. Housing's limited rebound is among reasons Federal Reserve policy makers last month announced more unconventional measures to boost demand and spur job growth.

'Even with modest job growth, we're seeing increasing household formation, and that's really boosting demand for apartments,' said Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Pennsylvania. 'What's worrisome is the slide in permits. It's kind of a mixed bag.'

Housing starts estimates ranged from 560,000 to 643,000 in the Bloomberg survey of 75 economists. August's pace was revised to 572,000 from a previous estimate of 571,000. Home construction totaled 554,000 units in 2009, the fewest since record-keeping began in 1959.

Stock-Index Futures

Stock-index futures trimmed losses after the figures. The contract on the Standard & Poor's 500 Index expiring in December dropped 0.1 percent to 1,221.8 at 8:58 a.m. in New York, after losing as much as 0.7 percent earlier.

The cost of living in September rose at the slowest pace in three months, a Labor Department report showed. The consumer price index climbed 0.3 percent. Core prices, which exclude volatile food and fuel costs, rose 0.1 percent, less than forecast and the smallest gain since March.

The Commerce Department's report also showed building permits dropped 5 percent to a 594,000 annual rate in September.

New construction of single-family houses increased 1.7 percent to a 425,000 rate in September from the prior month. Work on multifamily homes, such as townhouses and apartments, surged 51.3 percent to an annual rate of 233,000.

Total starts climbed in all four regions, led by an 18.1 percent rise in the West and a 15.7 percent increase in the South.

Lower Rates

Lower borrowing costs may be supporting demand even as the overhang of distressed properties weighs on prices. The average rate for a 30-year fixed loan dropped to 3.94 percent in the first week of October, the lowest in records dating back to 1971, according to Freddie Mac.

Foreclosure filings in the U.S. declined 34 percent in the third quarter from a year earlier as states continued to probe allegations of foreclosure 'robo-signings' and lenders scrutinized paperwork, according to RealtyTrac Inc. data released last week. At the same time, default notices rose 14 percent from the second quarter, a sign lenders may be speeding up the repossession process, RealtyTrac said.

Scottsdale, Arizona-based Meritage Homes Corp., which builds energy-efficient single-family homes, saw its sales in the quarter ended in September rise from a year earlier even as demand remains at 'depressed levels,' executive vice president Brent Anderson said on an Oct. 12 conference call.

'We Need' Jobs

'We need to have more people in jobs, good, well-paying, full-time jobs,' Anderson said. 'It's really a matter of confidence.'

Homebuilders in the U.S. were less pessimistic in October as gauges of prospective buyer traffic, sales and purchase expectations rose. The National Association of Home Builders/Wells Fargo sentiment index unexpectedly increased to 18, the highest level since May 2010, figures showed yesterday. Readings less than 50 mean more respondents said conditions were poor.

Fed Chairman Ben S. Bernanke said Oct 4 that the central bank was ready to take further steps to boost an economy that he said was 'close to faltering.' Speaking before Congress's Joint Economic Committee, Bernanke said home construction was not aiding the expansion, unlike in prior recoveries.

He said 'the overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of 'underwater' mortgages' have hurt home construction.

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

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