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U.S. April Housing Starts Rise 11% to 2.038 Million-Unit Pace

U.S. April Housing Starts Rise 11% to 2.038 Million-Unit Pace

May 17 (Bloomberg)-- U.S. housing starts rebounded more than expected in April as mortgage rates near historic lows and rising job growth spurred home sales.

The 11 percent increase brought the annual pace of new construction to 2.038 million, the Commerce Department said today in Washington. Starts fell almost 18 percent to 1.836 million in March, the biggest drop in 14 years, after wet weather and the Easter holiday curbed building. The median forecast called for 2 million starts in April.

Last month's figures are consistent with forecasts that this year may be the best for new-home construction since 1978. The bounceback also reinforces data on jobs and retail sales that the economy was off to a strong start in the second quarter.

``We expect early 2005 to mark the peak in the housing sector, as the mix of underlying fundamentals remain supportive,'' said Mike Englund, chief U.S. economist at Action Economics LLC in Boulder, Colorado, ahead of the report.

The forecast of 2 million was the median from 63 economists surveyed by Bloomberg News. Starts in March were previously reported at 1.837 million.

Building permits, an indicator of future construction, rose 5.3 percent to 2.129 million at an annual rate from 2.021 million.

Housing starts this year may rise to 1.969 million from last year's 1.956 million, the National Association of Realtors said in a May survey. Combined sales of new and existing homes are expected to be 7.874 million after last year's 7.99 million record.

Starts of single-family and multi-family dwellings rose. Starts of single-family homes increased 6.3 percent to 1.635 million units at an annual rate from a four-month low of 1.538 million. Starts of multi-family housing rose 35 percent to an annual rate of 403,000, the highest in two months.

Rising Demand

Starts for all types of housing rose in three of four regions. They increased 25 percent in the South to 1.045 million, the biggest percentage increase since July 1995. Starts rose 6.2 percent in the Midwest to 326,000 and 2.5 percent in the West to 492,000. Starts fell 18 percent in the Northeast to 175,000.

Homebuilders became more optimistic in May, with the National Association of Home Builders/Wells Fargo index rising to 70 from a seven-month low of 67 in April.

The pace of construction and sales isn't keeping up with demand, at least in the South and West where Meritage Homes Corp. operates, John R. Landon, co-chief executive of the Scottsdale, Arizona, homebuilder, said May 10.

``Demand for housing in those markets is extremely strong,'' he said. ``We expect the market to stay very strong.''

Completions

Builders may be having to work off backlogs. Housing units authorized but not started rose to a 19-year high of 224,100 in April, up 22 percent from a year earlier, today's report showed. The figures aren't seasonally adjusted, meaning the most reliable comparisons are with a year earlier.

Housing completions, with are seasonally adjusted, rose 7 percent in April to 1.89 million. Compared with a year earlier, completions were down 3.4 percent.

Homebuilding is helping drive the economy. Construction accounted for 47,000 of the 274,000 jobs that were added in the U.S. last month and 29,000 of the 146,000 jobs added in March.

The April increase in payrolls was higher than expected, and retail sales rose last month by the most in seven months.

The construction industry is also boosting sales at homebuilders and related industries. The Standard & Poor's 500 Homebuilding Index is up 50 percent from a year ago.

Falling Rates

Rinker Group Ltd., an Australian company that is the world's fifth-largest cement maker, said U.S. earnings may surge as much as 25 percent this year as the company raises prices and benefits from building in Florida and Arizona.

``We expect for the next year or two fairly buoyant conditions to continue'' in the U.S. construction market, David Clarke, chief executive of Sydney-based Rinker, which makes 80 percent of its profit in the U.S., said in an interview on May 12.

Mortgage rates are also favoring the industry. The average rate on a 30-year mortgage fell to 5.75 percent in the first week of May from 6.04 percent a month earlier, according to U.S. mortgage purchaser Freddie Mac. The rate, which reached a four- decade low of 5.2 percent in June 2003, rose to 5.77 percent last week.

The median price of previously owned homes in metropolitan areas rose 9.7 percent in the first quarter from a year ago, the Realtors' group said May 12. Gains were greatest in the West, at 16.9 percent, and the Northeast, at 14 percent. Growth was slowest in the South, at 6.6 percent. The median home price rose to $188,800 from $172,100 a year ago.


To contact the reporter on this story:
Bob Willis in Washington at [e-mail]


LINK: http://quote.bloomberg.com/apps/news?pid=10000006&sid=aN_ZQ.Coxw8U&refer=home