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Business Title: New U.S. Housing Construction in April Exceeds Forecasts Builders in the U.S. broke ground on more homes than anticipated in April, indicating the residential real estate industry is stabilizing. Starts rose 2.6 percent to a 717,000 annual rate from March’s revised 699,000 pace that was stronger than previously reported, Commerce Department figures showed today in Washington. The median estimate of 80 economists surveyed by Bloomberg News called for a rise to 685,000. Building permits, a proxy for future construction, fell from a more than three-year high. Employment gains, cheaper homes and record-low mortgage rates are combining to lift demand and encourage builders to take on projects. At the same time, distressed properties are thwarting a quicker recovery in the housing market three years after the end of the recession it helped trigger. “We’re at a point where we see more light and less tunnel,” said Michael Gapen, a senior U.S. economist at Barclays Capital in New York. “Residential construction is no longer a drag on the economy and will contribute to growth.” Estimates in the Bloomberg survey for April ranged from 641,000 to 730,000. The prior month was revised from 654,000. Today’s report reflects revisions dating back to January 2010. Stock-index futures maintained gains after the figures, with the contract on the Standard & Poor’s 500 Index expiring next month rising 0.6 percent to 1,335.9 at 8:32 a.m. in New York. Permits decreased 7 percent to a 715,000 annual pace last month from 769,000 in March, which was the fastest since September 2008, today’s report showed. March was revised from a previously reported 764,000 pace. Construction of single-family houses climbed 2.3 percent to a three-month high 492,000 rate from 481,000 the prior month. Work on multifamily homes, such as townhouses and apartment buildings, increased 3.2 percent to an annual rate of 225,000. Two of four regions had an increase in overall starts, reflecting an 11.6 percent gain in the South and a 6.7 percent rise in the Midwest, today’s report showed. The outlook for residential real estate is improving, figures signaled yesterday. The National Association of Home Builders/Wells Fargo index of builder confidence jumped to a five-year high, the Washington-based group reported. Borrowing costs remain attractive. The average rate on a 30- year fixed mortgage fell to an all-time low of 3.83 percent in the week ended May 10, according to data from Freddie Mac going back to 1971. The average 15-year rate dropped to 3.05 percent, also the lowest ever, the McLean, Virginia-based mortgage-finance company said. A housing affordability index that’s based on a combination of resale prices, household income and mortgage rates reached an all-time high in the first quarter, the National Association of Realtors reported yesterday. One source of strength in residential construction is that work on apartment projects has climbed as the foreclosure crisis turned more Americans into renters. While demand for multifamily units, which include townhouses, is projected to provide homebuilders with new business, it remains volatile. In the U.S. Southeast region, which has lagged behind the U.S. recovery the past three years, building is accelerating, led by new construction of condominiums in Miami, according to SunTrust Banks Inc. (STI) Chief Executive Officer William Rogers. Housing in the Nashville, Tennessee, and Washington markets is “back on the upswing,” while Marco Island and Sarasota, Florida, “are showing improvement,” he said. “We are starting to see some traction,” he said in an interview in Atlanta, where the lender is based. “In housing, things are stabilizing to stabilized.” Builders still have to contend with a stream of distressed houses returning to the market, adding to inventory and pushing prices even lower. Foreclosures and tight credit markets remain a constraint on the housing industry, said Federal Reserve Governor Elizabeth Duke in a speech yesterday in Washington. While still-elevated foreclosures are “indicative of a historic level of homeowner stress,” she said, “there are signs that further gradual improvement may lie ahead.” There are “some promising signs in the trend of house prices as well” and “somewhat encouraging” indicators of housing construction activity, Duke said.
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