Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.
The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.
“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”
The San Francisco transfer would mark the second real estate deal to unravel this year for Morgan Stanley, which bet big on the property markets as prices were rising. The firm last month agreed to surrender 17 million square feet of office buildings to Barclays Capital after acquiring them for $6.5 billion in 2007 from Crescent Real Estate Equities. U.S. commercial real estate prices have dropped 43 percent from October 2007’s peak, Moody’s Investors Service said last month.
“It’s not surprising this deal ran into trouble,” Michael Knott, senior analyst at Green Street Advisors in Newport Beach, California, said in an interview. “It was eye-opening among a group of eye-opening deals. There was almost no price too high in 2007 for office space in top gateway markets.”
Lost Value
The Morgan Stanley buildings may have lost as much as 50 percent since the purchase, he estimated.
Morgan Stanley bought 10 San Francisco buildings in the city’s financial district as part of a $2.5 billion purchase from Blackstone Group in May 2007. The buildings were formerly owned by billionaire investor Sam Zell’s Equity Office Properties and acquired by Blackstone in its $39 billion buyout of the real estate firm earlier that year.
The buildings Morgan Stanley is giving up are One Post, 201 California St., Foundry Square I, 60 Spear St. and 188 Embarcadero, Barnes said. The bank will continue to own the five other office buildings it acquired in the deal, Barnes said.
Morgan Stanley, based in New York, was the biggest property investor among Wall Street firms at the time of the purchase. The transaction made the company one of the largest office landlords in San Francisco, with the purchase giving the bank 3.9 million square feet of office space there.
Defaults Rise
Commercial mortgage defaults more than doubled in the third quarter from a year earlier as occupancies fell, according to Real Estate Econometrics LLC. Office vacancies will reach a near-record 19 percent in the first quarter of 2011, broker CB Richard Ellis Group Inc. estimated.
Property sales financed with commercial mortgage-backed securities plunged 95 percent from a record $237 billion in 2007, according to JPMorgan Chase & Co. A lack of securitized debt is driving down values, which may fall 55 percent from their peak, Moody’s said.
San Francisco prime office rents fell 37 percent in the third quarter from a year earlier, the biggest decline since 2001, as companies cut jobs, Colliers International said. The vacancy rate rose to 14 percent, the highest since 2005. Almost 1.4 million square feet of space was returned to the market in the first nine months of the year.
Morgan Stanley last month agreed to hand over Crescent to Barclays, ending the firm’s obligation on a $2 billion loan after taking almost $1 billion in losses.
When Morgan Stanley acquired it, Crescent owned 54 office buildings in cities including Dallas, Houston, Denver, Miami and Las Vegas. It also owned the Canyon Ranch spa and resort, residential developments in Scottsdale, Arizona; Vail Valley, Colorado; and Lake Tahoe, California.
The San Francisco Business Times earlier reported Morgan Stanley’s plans to transfer the five buildings.
Friday, December 18, 2009
Whitney Cuts Goldman Sachs, Morgan Stanley Estimates
Dec. 17 (Bloomberg) -- Meredith Whitney, the analyst known for predicting Citigroup Inc.’s dividend cut last year, reduced earnings estimates for Goldman Sachs Group Inc. and Morgan Stanley through 2011 because customers are trading less.
She now projects Goldman Sachs will earn $6 a share in the fourth quarter, $19.65 in 2010 and $20.60 in 2011. Those compare with the average analyst estimates of $5.65, $18.82 and $21.22, respectively, according to data compiled by Bloomberg. Whitney said Morgan Stanley’s profit will be $2.60 next year and $2.75 in 2011, versus average forecasts of $3.30 and $3.69. Both companies are based in New York.
“Our early look for the quarter shows that client activity appears to have slowed,” the New York-based analyst who runs Meredith Whitney Advisory Group LLC wrote in a report sent to clients.
Since the Standard & Poor’s 500 Index’s sank to a 12-year low in March, monthly stock trading volume has fallen 36 percent. Fewer than 7.87 billion shares changed hands each day on U.S. exchanges during November, the lowest month average since August 2008, Bloomberg data show. It’s risen to 8.12 billion so far in December.
Goldman Sachs and Morgan Stanley were the two biggest U.S. securities firms before converting to banks during last year’s financial crisis. Morgan Stanley returned to profit last quarter for the first time in a year, and Goldman Sachs has racked up record earnings in the first nine months of 2009.
Whitney has “neutral” ratings on both stocks. Goldman Sachs shares fell 1.1 percent to $163.19 at 9:41 a.m. in New York, trimming their gain this year to 93 percent. Morgan Stanley lost 0.8 percent to $30.10 and has rallied 88 percent since Dec. 31.
The analyst previously forecast profit of $6.38 a share in the fourth quarter for Goldman Sachs, $21.73 in 2010 and $24.04 in 2011. Morgan Stanley’s projections were $2.63 next year and $3.28 in 2011.
She now projects Goldman Sachs will earn $6 a share in the fourth quarter, $19.65 in 2010 and $20.60 in 2011. Those compare with the average analyst estimates of $5.65, $18.82 and $21.22, respectively, according to data compiled by Bloomberg. Whitney said Morgan Stanley’s profit will be $2.60 next year and $2.75 in 2011, versus average forecasts of $3.30 and $3.69. Both companies are based in New York.
“Our early look for the quarter shows that client activity appears to have slowed,” the New York-based analyst who runs Meredith Whitney Advisory Group LLC wrote in a report sent to clients.
Since the Standard & Poor’s 500 Index’s sank to a 12-year low in March, monthly stock trading volume has fallen 36 percent. Fewer than 7.87 billion shares changed hands each day on U.S. exchanges during November, the lowest month average since August 2008, Bloomberg data show. It’s risen to 8.12 billion so far in December.
Goldman Sachs and Morgan Stanley were the two biggest U.S. securities firms before converting to banks during last year’s financial crisis. Morgan Stanley returned to profit last quarter for the first time in a year, and Goldman Sachs has racked up record earnings in the first nine months of 2009.
Whitney has “neutral” ratings on both stocks. Goldman Sachs shares fell 1.1 percent to $163.19 at 9:41 a.m. in New York, trimming their gain this year to 93 percent. Morgan Stanley lost 0.8 percent to $30.10 and has rallied 88 percent since Dec. 31.
The analyst previously forecast profit of $6.38 a share in the fourth quarter for Goldman Sachs, $21.73 in 2010 and $24.04 in 2011. Morgan Stanley’s projections were $2.63 next year and $3.28 in 2011.
Wednesday, December 16, 2009
U.S. Economy: Housing Starts Climb, Inflation Gauge Unchanged
Dec. 16 (Bloomberg) -- Housing starts in the U.S. rose in November and a gauge of consumer prices was unchanged, supporting forecasts for an economic recovery that will generate little inflation.
Builders broke ground on 574,000 homes at an annual rate in November, an 8.9 percent increase from the prior month, the Commerce Department said in Washington. A Labor Department report showed consumer prices excluding food and energy were unchanged, compared with a median forecast for a 0.1 percent increase in a Bloomberg News survey of 79 economists.
Permits for future construction climbed to the highest level in a year, signaling builders expect sales to rise as homebuyers are lured by lower prices, tax credits and mortgage rates near record lows. Federal Reserve policy makers meeting today may indicate the recovery is gaining strength while repeating a pledge to keep the benchmark interest rate almost at zero for an “extended period” to push down an unemployment rate that’s forecast to exceed 10 percent through June.
“The housing market is stabilizing at very low levels, which of course is better than plunging,” said Harm Bandholz, an economist at UniCredit Research in New York who correctly forecast no change in the so-called core consumer-price index. “The Fed will be a little more upbeat about the economy, but core inflation will continue to trend lower. The Fed does not want mortgage rates to rise right now or in the near future.”
The Standard & Poor’s 500 Index was up 0.7 percent to 1,115.11 at 11:10 a.m. in New York. The S&P’s Supercomposite Homebuilding Index rose 3 percent to 237.51.
Projected Gain
Housing starts matched the median estimate of 78 economists surveyed by Bloomberg News and followed a 10 percent drop the prior month. The government revised October’s reading down to a 527,000 pace from the 529,000 previously estimated.
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.
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.”
Weather Factor
Favorable weather may have played a role in boosting construction last month, said 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.
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.
Fed Chairman Ben S. 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.
Shelter, Clothing
The so-called core consumer price index that excludes food and energy showed no increase last month for the first time this year, restrained by a drop in rents and cheaper clothing.
Overall, consumer prices rose 0.4 percent, matching economists’ forecasts and up from a 0.3 percent gain in October, today’s Labor Department report showed.
Compared with a year earlier, consumer prices were up 1.8 percent. Core prices rose 1.7 percent from November 2008, matching the year-over-year gain in October.
After rising 4.1 percent in November, fuel costs have retreated so far this month, and comments from companies such as Best Buy Co. indicate unemployment close to a 26-year high is prompting retailers to discount merchandise.
Computer Discounts
Best Buy, the largest electronics retailer, said yesterday that its fourth-quarter gross profit rate will be lower than anticipated because of discounted laptop computers and $299.99 flat-screen TVs to attract customers.
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.
A separate Commerce Department report today showed the U.S. current-account deficit widened to $108 billion in the third quarter from a seven-year low of $98 billion in the previous three months, reflecting a larger shortfall in trade as imports rose faster than exports.
Builders broke ground on 574,000 homes at an annual rate in November, an 8.9 percent increase from the prior month, the Commerce Department said in Washington. A Labor Department report showed consumer prices excluding food and energy were unchanged, compared with a median forecast for a 0.1 percent increase in a Bloomberg News survey of 79 economists.
Permits for future construction climbed to the highest level in a year, signaling builders expect sales to rise as homebuyers are lured by lower prices, tax credits and mortgage rates near record lows. Federal Reserve policy makers meeting today may indicate the recovery is gaining strength while repeating a pledge to keep the benchmark interest rate almost at zero for an “extended period” to push down an unemployment rate that’s forecast to exceed 10 percent through June.
“The housing market is stabilizing at very low levels, which of course is better than plunging,” said Harm Bandholz, an economist at UniCredit Research in New York who correctly forecast no change in the so-called core consumer-price index. “The Fed will be a little more upbeat about the economy, but core inflation will continue to trend lower. The Fed does not want mortgage rates to rise right now or in the near future.”
The Standard & Poor’s 500 Index was up 0.7 percent to 1,115.11 at 11:10 a.m. in New York. The S&P’s Supercomposite Homebuilding Index rose 3 percent to 237.51.
Projected Gain
Housing starts matched the median estimate of 78 economists surveyed by Bloomberg News and followed a 10 percent drop the prior month. The government revised October’s reading down to a 527,000 pace from the 529,000 previously estimated.
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.
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.”
Weather Factor
Favorable weather may have played a role in boosting construction last month, said 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.
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.
Fed Chairman Ben S. 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.
Shelter, Clothing
The so-called core consumer price index that excludes food and energy showed no increase last month for the first time this year, restrained by a drop in rents and cheaper clothing.
Overall, consumer prices rose 0.4 percent, matching economists’ forecasts and up from a 0.3 percent gain in October, today’s Labor Department report showed.
Compared with a year earlier, consumer prices were up 1.8 percent. Core prices rose 1.7 percent from November 2008, matching the year-over-year gain in October.
After rising 4.1 percent in November, fuel costs have retreated so far this month, and comments from companies such as Best Buy Co. indicate unemployment close to a 26-year high is prompting retailers to discount merchandise.
Computer Discounts
Best Buy, the largest electronics retailer, said yesterday that its fourth-quarter gross profit rate will be lower than anticipated because of discounted laptop computers and $299.99 flat-screen TVs to attract customers.
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.
A separate Commerce Department report today showed the U.S. current-account deficit widened to $108 billion in the third quarter from a seven-year low of $98 billion in the previous three months, reflecting a larger shortfall in trade as imports rose faster than exports.
Fed May Raise U.S. Economic Assessment, Affirm Near-Zero Rates
Dec. 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and his colleagues may indicate the U.S. recovery is gaining strength while repeating a pledge to keep the benchmark interest rate almost at zero for an “extended period.”
The Federal Open Market Committee gathers as growth in the final quarter of 2009 accelerates to more than 4 percent, the fastest pace in almost four years, according to analysts’ forecasts. The FOMC will probably discuss how to eventually withdraw unprecedented programs to revive credit, including purchases of $1.43 trillion in housing debt, economists said.
Fed officials in a statement today may try to head off any investor expectations the improving economy will prompt them to raise interest rates early next year. While acknowledging that job losses are easing after last month’s drop in the unemployment rate, the FOMC may reaffirm that tight credit and weak income growth are among the risks to the recovery.
“The last thing they want is for people to expect that tightening is closer,” said Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington and a former Fed governor. “They are going to increase their confidence about the sustainability of the expansion, but not become materially more optimistic about growth next year.”
The FOMC is scheduled to issue its statement at around 2:15 p.m. after the end of its two-day meeting.
“Assuming they don’t drop ‘extended period,’ market reaction will probably be limited,” said James O’Sullivan, chief economist at MF Global Ltd. in New York.
Changed Forecasts
Macroeconomic Advisers raised its forecast for fourth- quarter growth last week to a 4.2 percent annual pace from 3.1 percent, while Credit Suisse and JPMorgan Chase & Co. increased its estimate by 1 percentage point to 4.5 percent. Retail sales in November climbed twice as much as economists expected, while exports rose to the highest level in 11 months, government figures showed.
“The Fed has to fight two battles: supporting economic growth and showing the market it is concerned about potential inflation later on,” said Sung Won Sohn, former chief economist at Wells Fargo & Co. and now an economics professor at California State University-Channel Islands in Camarillo, California. “Balancing inflation and economic growth and the communications related to that will be their most difficult challenge.”
Fed funds futures on the Chicago Board of Trade indicated yesterday a 53 percent chance that the FOMC will raise its main lending rate by at least a quarter-percentage point by its June meeting, compared with 35 percent odds a month ago.
Fulfill Mandate
Any expectation by investors that monetary policy tightening will occur sooner would complicate efforts by policy makers to reduce the 10 percent unemployment rate, said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey.
“They have a huge problem, and the risk is real,” he said. “It will take extraordinary growth for three years to significantly eat into the unemployed who have lost their jobs.”
U.S. payrolls have fallen by 7.2 million since the start of the recession in December 2007, and a growing population means more jobs must be created to restore full employment. The FOMC projects the unemployment rate will be between 9.3 percent and 9.7 percent in the fourth quarter of 2010, according to forecasts released after its November meeting.
Policy makers will probably also continue to debate the usefulness of selling assets as part of the so-called exit strategy from the unprecedented expansion of credit, Fed watchers said. Central bank officials have tested the use of reverse repurchase agreements to drain some of the cash the Fed has pumped into the economy.
Main Lending Rate
The Fed has kept the benchmark lending rate at a range from zero to 0.25 percent during the past 12 months and has adopted asset purchases as its main policy tool. Since March, the FOMC has said “exceptionally low” rates are likely warranted for “an extended period.”
Bernanke and New York Fed President William Dudley, who serves as vice chairman of the FOMC, signaled in speeches last week that they favored keeping the language.
The U.S. economy faces “formidable headwinds,” including a weak labor market and tight credit, that will probably generate a “moderate” pace of expansion, Bernanke said.
Growth will probably decline next year from the 3 percent to 3.5 percent pace likely in the last six months of this year, “mostly because some of the current sources of strength are temporary,” Dudley said.
‘Pretty Fragile’
“The economy is still pretty fragile,” said Dean Croushore, a former Philadelphia Fed economist who is now chair of the economics department at the University of Richmond in Virginia. “Because inflation has remained low and growth is positive, but not overly strong, the Fed has time to think about how to reduce the excess amount of liquidity in the market.”
The central bank will probably continue to describe inflation as “subdued” and inflation expectations as “stable,” economists said. The Fed’s preferred price measure, which excludes food and fuel, climbed 1.4 percent in October from a year earlier.
The Federal Open Market Committee gathers as growth in the final quarter of 2009 accelerates to more than 4 percent, the fastest pace in almost four years, according to analysts’ forecasts. The FOMC will probably discuss how to eventually withdraw unprecedented programs to revive credit, including purchases of $1.43 trillion in housing debt, economists said.
Fed officials in a statement today may try to head off any investor expectations the improving economy will prompt them to raise interest rates early next year. While acknowledging that job losses are easing after last month’s drop in the unemployment rate, the FOMC may reaffirm that tight credit and weak income growth are among the risks to the recovery.
“The last thing they want is for people to expect that tightening is closer,” said Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington and a former Fed governor. “They are going to increase their confidence about the sustainability of the expansion, but not become materially more optimistic about growth next year.”
The FOMC is scheduled to issue its statement at around 2:15 p.m. after the end of its two-day meeting.
“Assuming they don’t drop ‘extended period,’ market reaction will probably be limited,” said James O’Sullivan, chief economist at MF Global Ltd. in New York.
Changed Forecasts
Macroeconomic Advisers raised its forecast for fourth- quarter growth last week to a 4.2 percent annual pace from 3.1 percent, while Credit Suisse and JPMorgan Chase & Co. increased its estimate by 1 percentage point to 4.5 percent. Retail sales in November climbed twice as much as economists expected, while exports rose to the highest level in 11 months, government figures showed.
“The Fed has to fight two battles: supporting economic growth and showing the market it is concerned about potential inflation later on,” said Sung Won Sohn, former chief economist at Wells Fargo & Co. and now an economics professor at California State University-Channel Islands in Camarillo, California. “Balancing inflation and economic growth and the communications related to that will be their most difficult challenge.”
Fed funds futures on the Chicago Board of Trade indicated yesterday a 53 percent chance that the FOMC will raise its main lending rate by at least a quarter-percentage point by its June meeting, compared with 35 percent odds a month ago.
Fulfill Mandate
Any expectation by investors that monetary policy tightening will occur sooner would complicate efforts by policy makers to reduce the 10 percent unemployment rate, said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey.
“They have a huge problem, and the risk is real,” he said. “It will take extraordinary growth for three years to significantly eat into the unemployed who have lost their jobs.”
U.S. payrolls have fallen by 7.2 million since the start of the recession in December 2007, and a growing population means more jobs must be created to restore full employment. The FOMC projects the unemployment rate will be between 9.3 percent and 9.7 percent in the fourth quarter of 2010, according to forecasts released after its November meeting.
Policy makers will probably also continue to debate the usefulness of selling assets as part of the so-called exit strategy from the unprecedented expansion of credit, Fed watchers said. Central bank officials have tested the use of reverse repurchase agreements to drain some of the cash the Fed has pumped into the economy.
Main Lending Rate
The Fed has kept the benchmark lending rate at a range from zero to 0.25 percent during the past 12 months and has adopted asset purchases as its main policy tool. Since March, the FOMC has said “exceptionally low” rates are likely warranted for “an extended period.”
Bernanke and New York Fed President William Dudley, who serves as vice chairman of the FOMC, signaled in speeches last week that they favored keeping the language.
The U.S. economy faces “formidable headwinds,” including a weak labor market and tight credit, that will probably generate a “moderate” pace of expansion, Bernanke said.
Growth will probably decline next year from the 3 percent to 3.5 percent pace likely in the last six months of this year, “mostly because some of the current sources of strength are temporary,” Dudley said.
‘Pretty Fragile’
“The economy is still pretty fragile,” said Dean Croushore, a former Philadelphia Fed economist who is now chair of the economics department at the University of Richmond in Virginia. “Because inflation has remained low and growth is positive, but not overly strong, the Fed has time to think about how to reduce the excess amount of liquidity in the market.”
The central bank will probably continue to describe inflation as “subdued” and inflation expectations as “stable,” economists said. The Fed’s preferred price measure, which excludes food and fuel, climbed 1.4 percent in October from a year earlier.
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.”
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.”
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