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Business Title: Housing Starts Rise to Five-Month High in Sign of Stabilization Oct. 19 (Bloomberg) -- Builders in the U.S. unexpectedly began work on more homes in September, a sign the real estate market was stabilizing at depressed levels heading into the recent upheaval in the foreclosure crisis. Housing starts rose to a 610,000 annual rate, the most since April and up 0.3 percent from a revised 608,000 rate in August that was higher than previously estimated, Commerce Department figures showed today in Washington. Building permits dropped to the lowest level in more than a year as a plunge in the volatile multifamily area overshadowed a gain in single- family applications. The industry that precipitated the worst recession since the 1930s may be steadying after a government tax credit pulled demand into late 2009 and early this year. At the same time, foreclosure moratoria caused by faulty documentation at some of the nation’s biggest banks, near record-low home sales and a lack of jobs mean any rebound will take time to develop. “At least we’re making some progress here,” said John Herrmann, senior fixed income strategist at State Street Global Markets in Boston, who forecast starts at 605,000. “It’s a slow, steady-as-she-goes improvement in builder activity.” Stocks dropped as China raised interest rates to stem inflation and Apple Inc. forecast profit that missed analysts’ estimates. The Standard & Poor’s 500 Index fell 1.3 percent to 1,169.76 at 9:50 a.m. in New York. The S&P Supercomposite Homebuilding Index was up 0.4 percent. Median Forecast The median forecast of 71 economists surveyed by Bloomberg News projected September starts would drop to a 580,000 annual pace from a previously estimated 598,000 rate in August. Estimates ranged from 550,000 to 624,000. Building permits, a proxy for future construction, decreased 5.6 percent to a 539,000 annual rate in September, the lowest level since April 2009. Applications for multifamily units dropped 20 percent, while those for single-family homes climbed 0.5 percent. The number of single-family permits was lower than starts last month, which climbed 4.4 percent from August to a 452,000 annual pace, and the most since May. The level of permits raises the risk that construction will drop off in coming months. Work on multifamily homes, such as townhouses and apartment buildings, fell 9.7 percent to an annual pace of 158,000 after surging 42 percent the prior month. Sales have see-sawed as a result of the government incentive that was worth up to $8,000. Purchases contracts had to be signed by the end of April to qualify for the tax break. After reaching a 19-month high 414,000 annual rate in April, sales of new houses plunged to a record low 282,000 pace in May. Foreclosure Crisis With foreclosures reaching a record in September, U.S. regulators last week said they were investigating whether employees of lenders including Ally Financial Inc., JPMorgan Chase & Co. and Bank of America Corp. falsified documents used in the proceedings. Ally Financial and JPMorgan are among banks that have suspended some foreclosures or evictions to review paperwork, which may further delay a recovery in housing. The mishandling of foreclosures may push “a few buyers” into the market for new houses, Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, said in a note to clients. “But the prospects for new homebuilding are either flat, or a slight rise, with those prospects tightly constrained by the huge foreclosure overhang, scandal or not.” Obama’s Concern The Obama administration is concerned that halting foreclosures would hold up home sales, postponing a recovery in the housing market, White House Press Secretary Robert Gibbs said last week. With the approaching Nov. 2 congressional elections, Americans continue to have a dimmer view of Congress and President Barack Obama’s handling of the economy. Obama’s job approval in the week ended Oct. 17 was 45 percent, compared with an average 57 percent last year, according to a poll from Princeton, New Jersey-based Gallup. Housing’s inability to rebound is one reason the economic recovery hasn’t strengthened. Ben S. Bernanke is among policy makers that have said the too-slow recovery has kept the jobless rate too high and inflation too low. The chairman of the Federal Reserve last week said additional monetary measures may be needed to spur growth. Speculation that the central bank may pursue large-scale asset purchases has pushed down yields on U.S. Treasury securities, driving mortgage rates to record lows. Builders this month were less pessimistic. The National Association of Home Builders/Wells Fargo’s confidence index released yesterday rose in October to the highest level in four months. Nonetheless, the reading of 16 was well short of the 50 level that would signal the outlook is equally balanced between optimists and pessimists. KB Home, the Los Angeles-based homebuilder that focuses on first-time buyers, last month reported a smaller third-quarter loss as revenue increased for the first time in almost four years. KB has been cutting costs amid the slump in sales and is seeking to lure buyers with houses that are smaller and less expensive than older designs.
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