Wednesday, November 17, 2004

U.S. Housing Starts Rise 6.4% in October to 2.027 Million Pace

Bloomberg

Nov. 17 (Bloomberg) -- U.S. housing starts rose 6.4 percent in October to the highest level of the year, suggesting housing is helping drive economic growth, a government report showed.

Builders broke ground on 2.027 million residential units at an annual rate last month, up from a revised 1.905 million in September that was higher than originally reported, the Commerce Department said in Washington. The level of building permits, a sign of future activity, fell 0.7 percent to 1.984 million.

Mortgage rates that have stayed below 6 percent since July are keeping interest in home buying near record levels. Today's data suggests housing will continue to contribute to economic growth through the end of this year.

``Housing demand remains quite healthy,'' Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein in New York, said before the report. ``The housing sector this is still one of the strongholds of the economy.''

Denison forecast starts would rise to a 2.02 million rate.

Starts were expected to rise to a 1.96 million-unit rate last month, the median forecast of 65 economists in a Bloomberg News survey. Estimates ranged from 1.85 million to 2.088 million. The October total is the highest since December's 2.067 million annual rate, the Commerce Department said.

Residential construction slowed to a 3.1 percent annual rate of increase last quarter, adding 0.18 percentage point to overall economic growth. From March through June, housing construction rose 17 percent and contributed 0.86 percentage point.

The economy grew at a 3.7 percent annual rate in the third quarter, less than expected, as rising oil prices contributed to a record trade deficit and companies added less the inventories. U.S. gross domestic product is expected to be 3.5 percent in the fourth quarter, the median of 65 economists' forecasts in a Bloomberg News survey.

Single-Family

Starts of single-family homes rose 5.7 percent in October to a 1.645 million-unit pace after a 1.556 million rate a month earlier. Starts of townhouses, apartments and other multifamily dwellings rose 9.5 percent to a 382,000 annual rate.

D.R. Horton Inc., the largest U.S. homebuilder by market value, said last week that fiscal fourth quarter profit rose 52 percent from a year earlier as low borrowing costs boosted sales.

By region, starts rose 4 percent in the South to 932,000 at an annual pace; rose 5 percent in the West to 525,000 and rose 8.6 percent in the Midwest to 390,000. They surged 20 percent in the Northeast to 180,000.

Hurricanes Frances, Ivan and Jeanne, which caused millions of damage in the Southeast, may have delayed the start of some housing construction in September and pushed it into October.

Lennar Corp., the third-biggest U.S. homebuilder, said on Nov. 4 that the storms may delay about 600 home sales that were expected to be completed in the company's fiscal fourth quarter, which ends this month.

Completions

The number of homes authorized but not yet started fell 4.5 percent in October to 194,400. Houses already under construction last month rose 1.3 percent to a 1.254 million rate. Housing completions rose 2.7 percent to a 1.834 million rate. Single-family completions fell 0.1 percent to 1.538 million.

The National Association of Home Builders said yesterday its measure of homebuilder optimism held at the highest level of the year this month.

``While rates on long-term mortgages have edged up marginally in the last few weeks, the average 30-year loan remains below 6 percent,'' Bobby Rayburn, president of the NAHB and a home and apartment builder in Jackson, Mississippi, said in a statement. ``That's a key factor in driving buyer demand.''

Housing starts are expected to total a record 1.994 million this year, according to the Commerce Department data.

Mortgage Rates

The average rate on a 30-year fixed mortgage was 5.76 percent in September and 5.72 percent last month. Those are within a percentage point of the record low 5.21 percent reached in June 2003.

The National Association of Realtors on Nov. 5 raised its estimate of sales of new and existing homes for this year to a record 6.55 million, saying mortgage rates near historic lows came as a ``surprise.'' The group expects sales of new homes to be 1.17 million, also an all-time high.

The Commerce Department will report new home sales for October on Nov. 24. The inventory of new homes for sales fell to a 4.1 months' supply in September, from 4.2 months the month before, the Commerce Department said last month.

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