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Housing Starts, Construction See Slight Rise

Source: WSJ

Posted on 17 Sep 2009

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The Commerce Department reported today that housing starts rose modestly as apartment construction rebounded and offset the first decline in single-family home starts after five straight increases, underscoring the fragility of the economic recovery.

Housing starts climbed a less-than-expected 1.5% to a seasonally adjusted 598,000 annual rate compared to the prior month. Building permits also increased last month.

Single-family starts in August compared to the prior month retreated 3.0% to 479,000, a modest pullback after five straight increases that accumulated with the steady rise in new-home sales.

As for the beleaguered apartment market, construction of housing with two or more units jumped 25.3% to 119,000. Within that multi-family category, groundbreakings of homes with five or more units were 35.3% higher on the month -- and down 48.2% on the year.

U.S. builders are feeling more confident, a new report this week indicated. The National Association of Home Builders on Wednesday said its housing market index rose 1 point to 19 in September. The gauge measures builder confidence of sales prospects for new, single-family homes. At 19, the index is at its highest level since May 2008. But it takes a reading above 50 to indicate more builders view sales conditions positively than see them negatively. Within the NAHB report, a gauge of sales expectations for the coming six months slipped downward, by 1 point to 29, as builder fret about the November expiration of an $8,000 tax credit for first-time home buyers.

The latest data showed new-home sales climbed more than anticipated in July, staging their fourth straight month of strong gains. Inventories plunged. While unemployment is rising, to 9.7% at last count in August, the prices of new homes have fallen sharply, with the median sliding by 11.5% since July 2008.

"The real reason home sales are picking up is that home prices have collapsed," said Mike Larson, a Weiss Research analyst reacting favorably to the NAHB index. "That collapse has made housing affordable once again in many markets."

The 1.5% increase in August housing starts came short of expectations. Economists surveyed by Dow Jones Newswires forecast a 3.3% increase to an annual rate of 600,000.

July housing starts fell by 0.2% to 589,000, revised from an originally reported 1.0% decrease to 581,000. Starts rose 7.1% during June and 15.0% in May.

Year over year, housing starts were 29.6% lower than the pace of construction in August 2008.

Building permits in August climbed 2.7% to a 579,000 annual rate. Economists had expected permits to rise by 4.6% to a rate of 590,000. July permits fell 1.1% to 564,000.

Regionally, housing starts rose 23.8% in the Northeast and 0.9% in the Midwest. Sales fell 2.4% in the South and were flat out West.

Nationwide, an estimated 55,100 houses were actually started in August, based on figures not seasonally adjusted. An estimated 52,300 building permits were issued last month, also based on unadjusted figures.