Housing Starts in U.S. Climb 8.9% to 574,000 Pace

Dec. 16 (Bloomberg) -- Builders in November broke ground on more U.S. homes, a sign the recovery in homebuilding may carry through into 2010.

Housing starts rose 8.9 percent to an annual rate of 574,000, the Commerce Department said today in Washington. Building permits, a sign of future construction, climbed to the highest level in a year.

Government tax credits, lower home prices and borrowing costs near record lows may boost sales and construction in coming months. Federal Reserve policy makers today are forecast to reiterate a pledge to keep rates low for “an extended period” to sustain the recovery and lower a jobless rate that economists project will average 10 percent in 2010.

“Housing is in recovery mode, though the pace appears to have downshifted somewhat,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, which forecast a 575,000 rate. “The combination of the homebuyers’ tax credit, good affordability and looser credit conditions going forward will continue moderate gains.”

Higher fuel costs caused consumer prices to climb 0.4 percent in November, matching the median forecast of economists surveyed, according to figures from the Labor Department also showed today. Excluding food and energy, the so-called core index was unchanged, signaling inflation is contained.

Stocks Rise

Stock-index futures held earlier gains following the reports, while Treasury securities were little changed. The contract on the Standard & Poor’s 500 Index was up 0.4 percent to 1,108.5 at 8:52 a.m. in New York. The yield on the benchmark 10-year note was 3.59 percent, the same as late yesterday.

Housing starts matched the median estimate of 78 economists surveyed by Bloomberg News. Projections ranged from 540,000 to 620,000. The government revised October’s reading down to a 527,000 from the 529,000 previously estimated.

The U.S. current-account deficit widened in the third quarter to $108 billion, reflecting a larger shortfall in trade as imports rose faster than exports, the Commerce Department also reported. The gap, the broadest measure of trade because it includes transfer payments and investment income, was in line with the median forecast and followed a revised $98 billion deficit in the previous three months that was the lowest in more than seven years.

More Permits

The report on housing starts showed building permits increased to a 584,000 pace, the highest level since November 2008, from 551,000 the prior month. Permits were forecast to rise to 570,000.

Construction of single-family houses, which accounted for 84 percent of the industry last month, increased 2.1 percent to a 482,000 rate.

Work on multifamily homes, such as townhouses and apartment buildings, jumped 67 percent to an annual rate of 92,000.

All four regions showed a gain in starts in November, led by a 16 percent increase in the Northeast. Work began on 12 percent more homes in the South, 3 percent in the Midwest and 1.9 percent in the West.

Favorable weather may have also played a role in boosting construction last month, according to Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. November was the third warmest in 115 years of record keeping, according to the National Climatic Data Center, giving builders an opportunity to keep working. By contrast, October was the wettest in the past century.

Credit Extension

President Barack Obama’s extension last month of a first- time homebuyers’ tax credit of as much as $8,000 until April 30 will also give builders reason to speed up projects over the next couple of months.

Any sustained recovery will require gains in employment, economists said. The economy has lost 7.2 million jobs since the recession began, and economists surveyed by Bloomberg early this month forecast joblessness will average 10 percent next year.

Bernanke, in comments Dec. 7 at the Economic Club of Washington, listed a weak labor market and tight credit as among the “formidable headwinds” that he said would probably “keep the pace of expansion moderate.” The Fed’s decision on interest rates is due today at about 2:15 p.m. New York time.

More Pessimistic

Confidence among homebuilders unexpectedly fell in December on concern the lack of jobs and tight credit will limit a recovery. The National Association of Home Builders/Wells Fargo sentiment index decreased to the lowest level since June, the Washington-based group said yesterday. Readings below 50 mean most respondents view conditions as poor.

Some companies are feeling more upbeat. Toll Brothers Inc., the largest U.S. luxury homebuilder which reported a 42 percent surge in fiscal fourth-quarter orders, is anticipating a gradual recovery in the market, said Chief Executive Officer Robert Toll during a Bloomberg Television interview on Dec. 11.

“There is a pretty good reservoir of pent-up demand,” he said in New York City. “We don’t know how fast we’re coming back, but we do know we’re coming back.”