Builders broke ground in January on the most U.S. single-family homes in more than four years and permits for future construction rose, an indication the industry’s momentum carried over into 2013.
Work began on 613,000 one-family houses at an annual rate last month, the most since July 2008 and up 0.8% from December’s 608,000, Commerce Department figures showed today in Washington. Total housing starts dropped to a 890,000 rate, less than forecast and restrained by a slump in construction of multifamily units, which is often volatile.
Faster hiring and easier access to credit are needed to help complement historically low mortgage rates and stoke a sustained real-estate rebound. Rising sales at builders such as PulteGroup Inc. and Lennar Corp. indicate housing will keep contributing to growth this year after emerging as a bright spot in the economy in 2012.
“The fact that single-family starts are up is very encouraging, it is more important to the economy in terms of employment and growth” than the multifamily area, said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburg, who projected total starts would drop to a 895,000 pace. “The housing market recovery is continuing and will be an important contributor to economic growth. Permits look very solid, and that is a great sign.”
Wholesale prices in the U.S. rose in January for the first time in four months, reflecting higher costs for food and pharmaceuticals, another report showed. The producer-price index climbed 0.2% after a 0.3% drop in December, the Labor Department reported.
Stock-index futures held earlier losses after the reports. The contract on the Standard & Poor’s 500 Index maturing in March fell less than 0.1% to 1,527.1 at 8:34 a.m. in New York.
The median estimate of 85 economists surveyed by Bloomberg projected total housing starts would drop to a 920,000 annual rate. Estimates ranged from 870,000 to 1 million. The prior month’s figure was revised up to 973,000, the most since June 2008, from a previously reported 954,000 pace.
Permits increased to a 925,000 annual rate, the most since June 2008. They were projected to climb to a 920,000 annual rate, according to the survey median. Applications that are higher than the level of starts signal residential construction may strengthen.
“The drop in starts reflects a correction from the strength we saw earlier,” Sean Incremona, a senior economist at 4Cast Inc. in New York, said before the report. 4Cast was the best forecaster for home building starts over the past two years, according to data compiled by Bloomberg.
Work on multi-family homes, such as apartment buildings, plunged 24.1% to an annual rate of 277,000.
The drop in total starts reflected declines in two of four regions. Construction dropped 50% in the Midwest and 35.3% in the Northeast. It rose 16.7% in the West and 4.1% in the South.
The Federal Reserve’s efforts to keep mortgage costs low have helped bring about a turnaround in housing, the industry that was at the center of the financial crisis.
For all of last year, builders began work on 779,900 homes, a 28.1% increase from 2011 and the third straight annual gain. Even with the yearly improvement, housing starts remain short of the 2.07 million in 2005 at the peak of the boom, which was three-decade high. Sentiment in the industry leveled off this month from a more than six-year high, figures showed yesterday. The National Association of Home Builders/Wells Fargo index of builder confidence fell to 46 from the prior month’s 47 that matched the highest reading since April 2006.
Company results indicate the improvement in residential real estate will continue. PulteGroup, Lennar and D.R. Horton Inc., the top three U.S. homebuilders by market value, said orders rose in the most recently reported quarter.
“The combination of incredibly low mortgage rates, continued increases in rental rates and especially rising home prices, and very low -- and likely to stay low -- inventory levels for housing lead us to believe that 2013 will be a better year for U.S. housing than 2012,” Richard Dugas, chief executive officer of Bloomfield Hills, Michigan-based PulteGroup, said on a Jan. 31 earnings call.
Builders are now gearing up for the spring selling season, traditionally viewed as starting the weekend after the National Football League’s Super Bowl, an event held Feb. 3.
Near record-low mortgage costs have made it cheaper to buy a home for those who qualify for credit. The average fixed rate on a 30-year loan held at 3.53% in the week ended Feb. 14, down from 3.87% a year ago, figures from McLean, Virginia-based Freddie Mac showed.
Increased household formation is also encouraging builders to diversify into construction of apartments. Miami-based Lennar in January said it plans to construct $1 billion of multifamily properties, while Toll Brothers Inc., the largest U.S. luxury- home builder, said it will begin development of high-end college dormitories.
Firming prices are also helping to attract buyers who were reluctant to make purchases when property values were declining. The S&P/Case-Shiller index of house prices in 20 cities rose 5.5% in the 12 months to November, the biggest year-over-year gain since August 2006, the most recently available data showed.