Housing starts rise but rates ‘bumping along the bottom’

April 18, 2011, 1:35 am

A gain in March housing starts failed to make up for ground lost the prior month, as U.S. homebuilders continue to struggle almost two years into the economic recovery.

Work began on 549,000 houses at an annual pace, up 7.2 percent from the prior month and exceeding the 520,000 median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed Tuesday in Washington. Starts fell 19 percent in February to the lowest level in almost two years.

Housing, which pushed the economy into the recession, remains the weak link in the recovery and continues to weigh on consumer spending as home prices fall. The prospect of more foreclosures and joblessness forecast to average 8.7 percent this year means any recovery in housing may take time to develop.

“We remain at very low levels,” said Richard DeKaser, an economist at Parthenon Group in Boston, who correctly forecast last month’s increase. “The best description is bumping along the bottom. The underlying trend is one of stability or modest improvement since we hit our low point a couple of years ago.”

The Commerce Department revised February’s total to a 512,000 pace, up from a previously estimated 479,000. It was still the lowest since a 477,000 pace in April 2009 that was the weakest on record.

The revisions plus an increase in construction applications made the figures look less dire. Building permits, a proxy for future construction, rose 11 percent to a 594,000 pace. They were projected to rise 1.1 percent to a 540,000 annual pace.

Construction of single-family houses increased 7.7 percent to a 422,000 rate in March from the prior month. Work on multifamily homes, such as townhouses and apartments, increased 5.8 percent to an annual rate of 127,000.

Starts climbed in three of four regions, led by a 32 percent jump in the Midwest. They fell 3.3 percent in the South.

Confidence among U.S. homebuilders fell in April, led by a decline in the outlook for sales. The National Association of Home Builders/Wells Fargo sentiment index declined to 16 this month from 17 in March, data from the Washington-based group showed yesterday. A measure of sales expectations for the next six months dropped to the lowest level since October.

KB Home, the Los Angeles-based homebuilder that targets first-time buyers, this month reported a bigger-than-expected loss for the quarter ended Feb. 28 as orders plunged.

“Today’s consumers remain very cautious, whether they have concerns about home prices falling further, their job status, their ability to qualify for a loan, or general confidence in the economy,” President and Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5. “A sustained, broad-based housing recovery will not occur until we start to experience material job creation.”

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