Housing starts in the U.S. rose in January to a higher level than anticipated, a sign that government support is helping to stabilize the real estate market.
The extension and expansion of a homebuyer tax credit may boost demand in coming months. At the same time, builders will have to contend with mounting foreclosures and an unemployment rate that’s projected to end the year at 9.5%.
Estimates for January starts in the Bloomberg survey of 77 economists ranged from 530,000 to 700,000. The government revised December’s reading to a 575,000 pace from the 557,000 previously estimated.
A separate report today from the Federal Reserve showed industrial production climbed 0.9% in January, more than anticipated, following a 0.7% increase the prior month.
For all of 2009, builders broke ground on 554,500 houses, the fewest since records began in 1959. The annual rate was down 39 percent from 905,500 in 2008, the second-lowest level on record.
Today’s report showed building permits in January decreased 4.9% to a 621,000 pace from a 653,000 rate in December. Permits were forecast to fall 5.1% to a 620,000 rate.
Construction of single-family houses increased 1.5% to a 484,000 pace.
Work on multifamily homes, such as townhouses and apartment buildings, climbed 9.2% to an annual rate of 107,000.
Three of four regions showed an increase in starts in January, led by a 10% gain in the Northeast. The West showed an 8.9% increase and the South posted a 1% gain.
Part of the increase in January housing starts may reflect warmer weather, compared with the monthly average and colder-than-average temperatures in December. The previous month was the 14th coldest December and the 11th wettest in 115 years of record-keeping, according to the National Climatic Data Center in Asheville, North Carolina.
Obstacles remain to a sustainable housing recovery. Rising foreclosures are adding to inventory and may discourage some builders from beginning construction. A record three million U.S. homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast last month.
Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005.
President Barack Obama on Nov. 6 extended an $8,000 first-time buyer credit that was due to expire at the end of that month and expanded it to include current homeowners. The extension covers closings through June as long as contracts are signed by the end of April.
Confidence among U.S. homebuilders in February rose more than anticipated, the National Association of Home Builders/Wells Fargo said yesterday. The group’s index increased to a three-month high of 17 in February from 15 the prior month. Readings below 50 mean most respondents view conditions as poor.
Any sustained housing recovery will require gains in employment, economists said. The U.S. has lost 8.4 million jobs since the recession began in December 2007, and economists surveyed by Bloomberg earlier this month forecast joblessness will end the year at 9.5%, down from January’s 9.7% unemployment rate reported by the Labor Department.
D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, this month reported its first quarterly profit since 2007.
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