Housing starts drop to lowest level since April 2009
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 continues 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 Wednesday. 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 Tuesday 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 on the horizon...."
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FORECLOSURE FORECAST
Foreclosure filings will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac said Jan. 13. The Irvine, California-based data seller said foreclosures dropped in February to the lowest level in three years as lenders under legal scrutiny struggled to process a backlog of defaults and put new systems in place for home seizures.
"We still see this shadow supply of housing out there from foreclosures and distressed sales that really needs to get absorbed before you see a healthy new-home building market," said Scott Anderson, a senior economist at Wells Fargo Securities LLC in Minneapolis.
A filing surfeit later could add to the surplus of unsold properties and lead to more declines in home values. Residential real-estate prices dropped in the 12 months to December by the most in a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 2.4 percent, the biggest year- over-year decrease since December 2009, the group said Feb. 22.
JOB GROWTH
For housing, employment "is the most important part today or biggest impediment," said Larry T. Nicholson, chief executive officer of Ryland Group Inc., a Calabasas, California-based homebuilder catering to first-time buyers.
Whether potential buyers "have a job and they're going to keep their job or whether their hopes of employment are out there is still the biggest challenge for us today," Nicholson said at an investor conference March 8 in Orlando, Florida.