Housing Starts Fall, But Permits Rebound
Housing starts in the U.S. were little changed in February after declining less than previously estimated a month earlier, indicating the home-building industry is stabilizing after bad winter weather curbed construction.
The 0.2 percent decrease to 907,000 homes at an annualized rate last month followed a revised 909,000 pace in January, figures from the Commerce Department in Washington showed Tuesday. The median estimate in a Bloomberg survey called for a 910,000 rate after a previously reported 880,000 in January.
Warmer temperatures, a pickup in demand during the spring selling season and limited housing supply may help fuel further gains in new residential construction. The outlook for the industry later this year depends on whether hiring picks up enough to overcome higher mortgage rates and home prices.
"We will see improvement as the year goes on and weather improves," said David Sloan, a senior economist at 4cast in New York and the top-ranked forecaster of starts in the last two years, according to data compiled by Bloomberg. "The pace of increase will be fairly moderate. It suggests we're going to get respectable economic growth, but maybe not a strong acceleration."
Estimates of 82 economists surveyed by Bloomberg ranged from 792,000 to 986,000. The February pace was the slowest in four months.
Another report showed consumer prices rose 0.1 percent in February for a second month, according to the Labor Department. More than half the increase was due to higher food costs.
Stock-index futures held earlier gains after the figures, with the contract on the Standard & Poor's 500 Index maturing in June rising 0.4 percent to 1,857.4 at 8:43 a.m. in New York.
Permits filed for future projects increased 7.7 percent to a 1.02 million pace in February, the most since October and reflecting a surge in applications for apartment-building construction. %VIRTUAL-article-sponsoredlinks%One-family home-building permits dropped for a third straight month to the lowest level in a year. The median forecast in the Bloomberg survey called for a 960,000 rate.
Work on single-family houses rose 0.3 percent to a 583,000 rate in February from 581,000 the prior month. Construction of multifamily projects such as condominiums and apartment buildings decreased 1.2 percent to an annual rate of 324,000.
Two of four regions showed increases in groundbreaking last month, led by the Midwest and South.
February ended with its coldest final week since 2003, according to Berwyn, Pa.-based weather data provider Planalytics. The second week of the month was the snowiest such period since 2007.
Inclement weather has extended beyond builders. It also kept customers from visiting car dealerships and retailers, weighing on sentiment. The University of Michigan's measure of U.S. consumer confidence declined to a four-month low in March, data last week showed.
Confidence among U.S. homebuilders rose less than forecast in March, with more builders reporting bad conditions than good. The National Association of Home Builders/Wells Fargo index of builder sentiment climbed to 47 this month from 46 in February, a report from the Washington-based group showed yesterday. Readings below 50 mean more survey respondents signaled poor market conditions.
Beyond weather, borrowing costs have increased for buyers. The rate on a 30-year fixed mortgage from Freddie Mac rose to 4.37 percent in the week ended March 13, up from 3.63 percent a year earlier.
Homebuilder Hovnanian Enterprises (HOV), which reported a wider loss for its fiscal first quarter as inclement weather extended construction times and slowed demand, sees better times ahead for the industry.
"We believe this is a temporary pause in the industry's recovery," Ara Hovnanian, chief executive officer New Jersey's largest homebuilder, said in a statement on March 5. "Based on the level of housing starts across the country, we continue to believe the homebuilding industry is still in the early stages of recovery."
Lean inventories will probably keep builders busy. A report from the Commerce Department last month showed the months' supply of new homes declined to 4.7 in January, the fewest since June, from 5.2 at the end of 2013.
Lowe's (LOW), the Mooresville, N.C.-based home-improvement retailer, also remains optimistic about the outlook for the housing industry.
"Those key drivers you think about, disposable income, employment, home prices continuing to appreciate, and then the housing turnover that I spoke to, all of those help support a healthy home improvement industry that we see out there," Chief Executive Officer Robert Niblock said during a March 13 conference call. "There's a few challenges. Credit remains tight."