Housing starts in the US increased more than forecast in August, outstripping a gain in building permits that signals residential construction will stay close to record lows.
Builders began work on 598,000 homes at an annual rate, up 10.5 per cent and the most since April, the Commerce Department said today in Washington. Economists surveyed by Bloomberg News forecast a 550,000 pace. Permits, an indicator of future activity, were issued at a 569,000 rate.
Builders took out fewer applications to start single-family homes for a fifth consecutive month, signaling a jobless rate at or above 9.5 per cent for the past 13 months is hurting companies such as Hovnanian Enterprises Inc. A distressed housing market is among reasons Federal Reserve policy makers meeting today will consider whether new measures are needed to boost growth.
“The housing market has found a bottom, and we’re bouncing along here,” said Thomas Simons, an economist at Jefferies Group Inc in New York. “The market is challenged by supply, and until that is cleared out, it will be tough for the homebuilders. We also need additional job creation.”
Estimates for August starts in the Bloomberg survey of 74 economists ranged from 505,000 to 600,000 after a previously reported 546,000 a month earlier.
Builder shares
Stocks fluctuated as declines in technology and consumer- staples companies offset a rally in homebuilders. The Standard & Poor’s 500 Index fell 0.2 per cent to 1,140.60 at 11:20 am in New York. The S&P Supercomposite Homebuilding Index, which includes D R Horton Inc. and Lennar Corp, rose 0.9 per cent. The yield on the 10-year Treasury note fell to 2.67 per cent from 2.70 per cent late yesterday.
The gain in starts was led by a 32 per cent jump in construction of multifamily units, which is often volatile. Work began on 4.3 per cent more single-family houses, which accounted for 73 per cent of the industry.
Similarly, the 1.8 per cent increase in building permits last month reflected a gain among multifamily units, which include townhouses and apartment building. Applications for single-family projects dropped to the lowest level since April 2009.
Regional breakdown
Three of four regions of the country had an increase in starts last month, led by a 34 per cent surge in the West and a 22 per cent gain in the Midwest.
The Fed’s policy-making Federal Open Market Committee is scheduled to announce its decision on interest rates today at about 2:15 pm. The benchmark interest rate has been in a range of zero to 0.25 per cent since December 2008.
The central bank said in its Beige Book survey of regional Fed banks earlier this month that there were “widespread signs of a deceleration” in the economy from mid-July through the end of August. Most areas of the US reported “very low or declining home sales.”
Sales of new houses dropped in July to the lowest level in records dating back to 1963, figures from the Commerce Department showed last month.
