Housing Starts in U.S. Climb to Nine-Month High

Builders in the U.S. broke ground in August on the most houses in nine months, led by a jump in multifamily dwellings that overshadowed a decrease in construction of single-family homes.
By: Bob Willis: Bloomberg.com
Housing starts rose 1.5 percent to an annual rate of 598,000, as anticipated, figures from the Commerce Department showed today in Washington.
Single-family projects dropped 3 percent, the first decrease since January, while work began on 25 percent more multifamily units, such as apartments.

Builders may be pulling back as the expiration of the government’s tax credit for first-time buyers nears. The incentive, plus foreclosure-driven declines in prices, helped boost sales in recent months, and companies may not want to be caught with excess supply should the program fail to be extended.

“These tax incentives often borrow from future sales and the pickup does not last,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “This does not throw the recovery idea into a tailspin, but the housing normalization will come at a slow, measured pace.”

Futures on the Standard & Poor’s 500 Stock Index were down 0.1 percent to 1,062.60 at 8:39 a.m. in New York after rising as much as 0.6 percent.

Jobless Claims

A separate report today from the Labor Department showed that 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.

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 economists surveyed 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 3 percent to a 479,000 rate, the first decline since January. Work on multi-family units, which make up the rest of the market and is often volatile, jumped 25 percent 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.

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.

Toll Brothers

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.”