March 16 (Bloomberg) -- Housing starts in the U.S. fell in February as record snowfall in parts of the country hampered construction, while fewer building permits signaled demand is stagnating. Builders broke ground on 575,000 homes at an annual rate last month, down 5.9 percent from January’s revised 611,000 pace that was higher than initially estimated, Commerce Department figures showed today in Washington. Building permits, a sign of future construction, decreased for a second month.
Mounting foreclosures are making it harder to clear inventories, keeping pressure on prices and discouraging new construction. The economy has yet to create the sustained job growth that could invigorate housing demand and is one reason Federal Reserve policy makers will keep interest rates near zero after their meeting today.
“February was really a weather story as construction was hard-hit by the snowstorms,” Zach Pandl, an economist at Nomura Securities International Inc. in New York, said before the report. “Beyond the weather, housing starts are basically plateauing. The recovery is going to be slow, with activity at very low levels.”
Starts on dwellings were projected to fall to a 570,000 annual pace, after a previously reported 591,000 in January, according to the median forecast of 71 economists surveyed by Bloomberg News. Estimates ranged from 510,000 to 610,000.
New-home construction rose 0.2 percent in February from the same month last year.
Building permits declined 1.6 percent to a 612,000 annual rate after a 4.7 percent drop in January. Permits were forecast to decrease to a 601,000 annual pace, according to the survey median.
Single-Family Homes
Construction of single-family houses dropped 0.6 percent to a 499,000 rate in February.
Work on multifamily homes, such as townhouses and apartment buildings, slumped 30 percent to an annual rate of 76,000, the lowest in four months.
The decrease in starts was led by a 16 percent decline in the South and a 9.6 percent drop in the Northeast. Starts rose 11 percent in the Midwest and 7.9 percent in the West.
The number of homes under construction in February declined 2.2 percent to a record-low 492,000, today’s report showed.
A report yesterday showed builder confidence unexpectedly declined in March as prospective-buyer traffic fell to a one-year low. The National Association of Home Builders/Wells Fargo’s index of builder confidence dropped for the third time in four months.
Fed Meeting
Fed policy makers will leave the benchmark lending rate unchanged at zero to 0.25 percent, where it’s been since December 2008, according to the median forecast in a Bloomberg survey. They’re also likely to stick to their timetable of completing their plan to purchase $1.25 trillion in mortgage-backed securities at the end of this month that was part of an effort to reduce borrowing costs and revive the housing market.
President Barack Obama in November extended a tax credit of as much as $8,000 for first-time homebuyers, and expanded it to some current owners. The extension covers closings through June as long as contracts are signed by the end of April.
Bigger gains in housing sales ultimately require a pickup in job creation. Unemployment may end the year at 9.5 percent, according to a Bloomberg monthly survey.
Executives at Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, are among those watching if demand will hold up after the incentive fades. The Red Bank, New Jersey-based company this month reported its first quarterly profit since 2006.
“With the tax credit for first time and repeat buyers expiring at the end of the second quarter, we too are interested to see if the positive momentum that we established can be sustained,” Chief Executive Officer Ara Hovnanian said on a conference call with investors on March 3. “We’re keeping a close eye on this as we head into the summer months.”
