Mon, Jan 17, 2011 - Page 10 News List

US homebuilding likely languished: preview

Bloomberg

Homebuilding in the US probably dropped last month and sales of existing houses struggled to rebound from a post-tax credit slump, reflecting a market trying to regain its footing more than a year into the economic recovery, economists said before reports this week.

Builders began work on 550,000 houses at an annual rate, down 0.9 percent from November, according to the median estimate of 61 economists surveyed by Bloomberg News before US Department of Commerce data is released on Wednesday. Other reports may show purchases of previously owned homes rose for a second month and a gauge of the -economic outlook climbed.

KB Homes is among builders concerned unemployment stuck above 9 percent and a lack of confidence in the expansion may keep dissuading buyers. US Federal Reserve policy makers have said they will go ahead with a second round of quantitative easing that will pump another US$600 billion into financial markets by June in a bid to keep borrowing costs low.

“The main reason we’re not in a more typical booming recovery after a deep recession is that typically housing at this point would be growing very rapidly,” said Dean Maki, chief US economist at Barclays Capital Inc in New York. “It does not appear likely that it’s going to be a large contributor to growth anytime soon.”

Homebuilders have underperformed the broader stock market. The Standard & Poor’s Supercomposite Homebuilder Index climbed 2.3 percent last year, compared with a 13 percent gain for the S&P 500 Index. The builder gauge rose 3 percent to close at 288.46 on Jan. 14.

The projected drop in starts would follow a 3.9 percent increase in November that was the first gain in three months.

Builders had little incentive to take on work when house purchases slumped in the middle of last year following the expiration of a tax incentive of as much as US$8,000, which required -contracts to be signed by April 30 last year and closed by the end of September.

Building permits, a sign of future construction, probably rose 2 percent to a 555,000 annual pace in December, economists project the construction report will also show.

A gain in permits, combined with a rising stock market, improving consumer expectations and fewer initial jobless claims helped buoy prospects for the world’s largest economy, a Conference Board report may show on Thursday. The New York-based group’s index of leading indicators rose 0.6 percent last month, the sixth straight gain, according to the Bloomberg survey median.

While housing remains a weak link of the economy, sales of existing homes have begun recovering from their slump in July that pushed them to the weakest rate in a decade’s worth of record keeping. Purchases of previously owned houses rose 3.8 percent last month to a 4.86 million annual pace from the prior month, economists forecast in the Bloomberg survey. The National Association of Realtors will release the figures on Thursday.

Purchases reached an almost three-year high 6.49 million pace in November 2009, the month the tax credit was originally due to expire. The incentive was subsequently extended.

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