Housing starts in the U.S. rose more than forecast in June to the fastest pace in five months, figures from the Commerce Department show.
Work began on 629,000 houses at an annual pace, up 14.6 percent from May. The level of starts exceeded the most optimistic forecast in a Bloomberg News survey of economists. Building permits, a sign of future construction, unexpectedly climbed 2.5 percent.
Flooding and bad weather in parts of the country in recent months may have delayed construction until last month, allowing builders to catch up with orders. While the increase points to an industry that’s stabilizing, declining home values and delays in processing foreclosures mean it may take years to clear the market of distressed properties.
“A lot of this was due to some catch-up in activity that didn’t occur in April and May,” said Paul Dales, a senior economist at Capital Economics Ltd. in Toronto, who had the highest forecast in the Bloomberg survey. “I wouldn’t be surprised to see starts edge up gradually but the bigger picture is it’s still at a very depressed level.”
Housing starts were projected to rise to a 575,000 annual rate, according to the survey. Estimates ranged from 500,000 to 610,000 in the Bloomberg survey of 71 economists.
The Commerce Department revised May’s total to a 549,000 pace, less than a previously estimated 560,000.
Building permits rose to a 624,000 annual pace in June. They were projected to drop 2.3 percent to a 595,000 level, according to the survey median. The gain was led by a 6.9 percent jump in applications for work on multifamily units.
Construction of single-family houses increased 9.4 percent to a 453,000 rate in June, the most since November 2010, from the prior month. The monthly gain was the biggest since June 2009. Work on multifamily homes, such as townhouses and apartments, surged 30 percent to an annual rate of 176,000.
Starts climbed in all four regions, led by a 35 percent jump in the Northeast and a 25 percent increase in the Midwest.
June starts compares with the 587,000 units begun last year, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959. Starts reached a peak of 2.07 million in 2005.
With an overhang of distressed homes making their way through the foreclosure pipeline, more cash investors are looking for bargain, foreclosed homes and eschewing new houses. At the same time, unemployment above 9 percent and strict lending standards make it harder for most Americans to take advantage of mortgage rates that are close to a record low.
Purchases of previously owned homes, which make up about 95 percent of the market, climbed 1.9 percent in June from May’s six-month low to a 4.95 million annual rate, according to the median projection of economists surveyed by Bloomberg News before a National Association of Realtors’ report tomorrow.
Purchases of existing homes slumped to a 13-year low of 4.91 million in 2010 after reaching a record 7.08 million in 2005, during the housing boom.
Lender delays in processing home-loan defaults will push as many as 1 million foreclosure filings from this year into 2012 or beyond, casting an “ominous shadow” on the housing market, RealtyTrac Inc., a housing data provider, said last week. A clogged foreclosure pipeline may prevent real estate prices from finding a bottom as the housing slump extends into a sixth year.
With home prices continuing to drop and more distressed properties making their way to the market, builders remain reluctant to take on new projects.
Instead, demand for apartments and other multifamily housing that make up about a quarter of starts may be starting to increase as foreclosures make renters out of more Americans.
The S&P/Case-Shiller index of property values in 20 cities fell 4 percent in April from a year earlier, the biggest drop since November 2009, the group said last month. The index was down 33 percent from its peak in July 2006.
“The high proportion of distressed sales are keeping downward pressure on house prices,” Bernanke said July 13 in testimony to the House Financial Services Committee. “The demand for homes has been depressed by many of the same factors that have held down consumer spending more generally, including the slowness of the recovery in jobs.”
Some builders see signs of stabilization. Miami-based Lennar Corp., the third-largest U.S. homebuilder by revenue, last month reported second-quarter profits that beat analysts’ estimates on rising earnings at its distressed-investing unit.
“It is beginning to feel like the worst days of the housing market are getting behind us,” said Stuart Miller, chief executive officer of Lennar, on a June 23 conference call. “Stabilization and recovery will continue to be a slow and rocky process.”Share