U.S. home construction unexpectedly
increased in August to match the highest level of the year as
mortgage rates fell, a sign housing is helping boost the economy.
Building permits declined.
“Mortgage rates are falling and employment and income gains
will return to health shortly,” said Stephen Stanley, chief
economist at RBS Greenwich Capital in Connecticut. “The housing
sector should remain robust for at least the next several
months.”
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
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Housing starts rose 0.6 percent to a 2 million annual rate,
after July’s 1.988 million pace that was faster than reported
last month, the Commerce Department said in a Washington. The
August total matched March as the highest since 2.067 million
recorded in December. Construction permits, a sign of future
activity, dropped 5.5 percent to a 1.952 million annual pace.
Builder backlogs that are higher than a year ago will underpin housing and help contribute to economic growth,
economists said. The Federal Reserve’s moves to raise interest
rates since June have yet to lead to higher mortgage rates, which
are tied to longer term Treasury securities.
The average 30-year fixed mortgage rate has declined about a
half percentage point since June 30, when policy-makers raised
the overnight bank rate for the first time in a year. The Fed’s
Open Market Committee raised the rate for the third time in 2004
Tuesday.
Construction lags home sales, so it may be several months
before the declines in sales in June and July show up in fewer
starts. Builder optimism declined this month as a gauge of buyer
traffic fell, a private survey showed Monday. A measure of the
inventory of homes for sale increased to the highest since
February of 2003, according to recent statistics.
“There is perhaps some, but little, likelihood of much
higher housing starts from here,” said Joshua Shapiro, chief
economist at MFR Inc. in New York.
Lennar Corp., the third-biggest U.S. homebuilder by stock
market value, said Monday that orders fell 2 percent in the
three months through August as Hurricane Charley and an
approaching Hurricane Frances cut into sales. Still, backlogs at
the Miami-based company are up 14 percent from a year ago.
“We continue to see strong trends in the homebuilding
industry,” said Stuart Miller, chief executive of Lennar, in an
interview Monday. “From our vantage point it looks like the
housing market remains strong, and is likely to remain strong
into the future.”
U.S. housing starts have averaged 1.947 million at an annual
rate this year. The National Association of Home Builders, a
Washington trade group, expects 1.92 million home starts this
year, the most since 2.02 million in 1978.
Economists forecast starts to fall to a 1.93 million-unit
rate from the originally reported 1.978 million pace in July, the
median of 61 forecasts in a Bloomberg News survey. Estimates
ranged from 1.85 million to 2.05 million.
Bloomberg News
