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 recovery is limping along as the rest of the economy improves.
Beginning home construction dropped 22.5 percent to a 479,000 annual rate, Commerce Department figures showed today in Washington. The decline 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 annual 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 yesterday the housing market “continues to be depressed,” as they maintained plans to purchase Treasury securities to boost economic growth.
“Demand for new construction has remained weak,” Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York, said before the report. “Until we see a sustained turn in the labor market where people perceive job security, it’s going to be a slow process for a recovery in housing demand.”
Housing starts estimates ranged from 537,000 to 638,000 in the Bloomberg News survey of 74 economists. January’s pace was revised to 618,000 from a previous estimate of 596,000.
Permits declined by 28 percent in the Northeast to the lowest on record and by 14 percent to an all-time low in the West.
Construction of single-family houses decreased 12 percent to a 375,000 rate in February, the slowest since March 2009, from the prior month. Work on multifamily homes, such as townhouses and apartments, slumped 46 percent to an annual rate of 104,000.
Starts in fell in all four regions, led by a 49 percent drop in the Midwest to a record low. Starts declined 38 percent in the Northeast, 28 percent in the West and 6.3 percent in the South.
Fed Chairman Ben S. Bernanke said during his testimony to Congress this month that the housing sector “remains weak” even with “some grounds for optimism” in the economy.
“Many potential home buyers are finding mortgages difficult to obtain and are also worried about additional declines in house prices,” Bernanke told lawmakers March 2.
Until more people want homes, “there’s no demand for construction to build houses and so the construction industry is quite reduced,” Bernanke said. There were 188,000 new houses on the market at the end of January, the fewest since December 1967, Commerce Department figures showed Feb. 24.
Fed policy makers, after their second meeting of the year yesterday, reaffirmed their plans to buy $600 billion of Treasuries through June to “promote a stronger recovery.”
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.
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.
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