Builders broke ground on more houses than forecast in December, capping the best year for the industry since 2008, another sign residential real estate is boosting the U.S. economic expansion.
Starts climbed 12.1 percent last month to a 954,000 annual rate, exceeding all forecasts in a Bloomberg survey of economists and the most since June 2008, the Commerce Department reported today in Washington. For all of last year, construction began on 780,000 homes, up from 608,800 in 2011 and also the most since 2008.
Low borrowing costs and rising property values are spurring homebuyer traffic for the market that triggered the latest recession. Confidence among homebuilders such as Lennar Corp. is improving, even as tight credit remains an obstacle to further progress in residential real estate’s healing.
“The housing market’s in a decent recovery,” said David Sloan, a New York-based senior economist at 4Cast Inc., who projected a rise in starts to a 920,000 rate. “There is momentum continuing in the housing market recovery.”
Another report today showed the number of Americans filing first-time claims for unemployment insurance payments fell more than forecast last week to the lowest level in five years, pointing to further improvement in the labor market.
Applications for jobless benefits decreased by 37,000 to 335,000 in the week ended Jan. 12, the fewest since January 2008, according to Labor Department figures. Economists forecast 369,000 claims, according to the median estimate in a Bloomberg survey. A spokesman for the agency said the drop may reflect the difficulty the government has in adjusting the data following the holidays when seasonal workers are let go.
Stock-index futures added to earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in March climbed 0.5% to 1,473.1 at 8:45 a.m. in New York.
The median estimate of 84 economists surveyed by Bloomberg called for an increase to 890,000. Projections ranged from 850,000 to 930,000. The prior month was revised down to an 851,000 pace from a previously reported 861,000 rate.
Building permits, a proxy for future construction, climbed less than starts, indicating the industry may take a breather in coming months. The number of applications issued climbed 0.3% in December to an 903,000 annual rate from a 900,000 pace in November. The reading was in line with the 905,000 median forecast of economists surveyed by Bloomberg.
Starts jumped by 28.1% in 2012 from the prior year, the biggest annual gain since 1983.
Nonetheless, the market remains short of the 2.07 million started at the peak of the housing boom in 2005, which was three-decade high. The number of starts averaged 1.74 million a year from 2000 through 2004.
Construction of single-family houses climbed 8.1% in December from the prior month to a 616,000 annual rate, also the highest since June 2008. Work on multifamily homes, such as apartment buildings, climbed 20.3% to an annual rate of 338,000.
All four regions showed a gain in starts last month, led by a 24.7% surge in the Midwest.
Confidence among homebuilders held in January at the highest level since April 2006, the National Association of Home Builders/Wells Fargo reported yesterday. The group’s gauge of buyer traffic also climbed to a more than six-year high.
Lennar, the largest U.S. homebuilder by market value, is leveraging rental demand by pledging to construct $1 billion of multifamily properties in an attempt to diversify its offerings.
The Miami-based company plans to start building 3,000 apartments at a development cost of $560 million this year, Chief Executive Officer Stuart Miller said earlier this week on a conference call. The first projects are a $36 million, 316- unit community in Jacksonville, Florida, in partnership with Carlyle Group LP, and a $32 million, 264-unit community northeast of Atlanta.
“As demand for new sale housing continues to increase from historically low levels, rental demand has continued to grow, fueled by expanding household formations, credit and down payment-challenged homebuyers and steadily improving employment,” Miller said on the call.
Lennar reported fiscal fourth-quarter earnings that beat analysts’ estimates as revenue jumped 42 percent and profit margins climbed.
Cheaper borrowing costs are attracting home buyers who have adequate credit. The average rate on a 30-year fixed purchase loan was 3.40% in the week ended Jan. 10, compared to 3.89% a year ago, according to McLean, Virginia-based Freddie Mac.
Lenders such as San Francisco-based Wells Fargo & Co. are benefitting from an increase in homebuyer traffic as the housing market that triggered the recession is showing further signs of healing.
“The housing market began a steady rebound during 2012,” Chief Executive Officer John Stumpf said on a Jan. 11 conference call. “While many measures of activity and prices remain low by historical standards and a complete recovery will still take some time, there is no doubt that a corner was turned.”
Residential fixed investment climbed almost 14% in the third quarter from a year earlier to $370.9 billion, its highest level since the end of 2008, the Commerce Department reported Dec. 20. The broader U.S. economy expanded at an annual pace of 3.1% in the three months to September. Gross domestic product will increase 2% this year, based on the median of 96 estimates in a Bloomberg survey.