U.S. Economy: October Housing Starts Fall to 1.603 Mln Pace
By Monee Fields-White
Washington, Nov. 20 (Bloomberg) -- U.S. home construction fell in October to the lowest in six months, indicating a tapering off of the housing boom that's been a mainstay of the economy.
Builders broke ground on new homes at an annual pace of 1.603 million units last month, as construction of single-family homes and apartments and other multifamily structures declined, the Commerce Department said. Starts fell 11.4 percent from September's 1.810 million pace to the lowest since April.
Home construction ``did a pretty good job through the recession and the recovery,'' said David Seiders, chief economist at the National Association of Home Builders. The pace of construction ``will be easing off a bit to a plateau. So, don't keep thinking of housing as a growth engine for the economy.''
So far this year 1.444 million homes have been started, the strongest January-October period since 1986. While housing won't contribute much to economic growth in coming months, falling mortgage rates, record home sales and more building permits will probably keep the pace of construction elevated, economists said.
The October decline ``cannot be regarded as a symptom of any real weakening'' in housing, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
Federal Reserve Chairman Alan Greenspan said yesterday that last year's recession didn't create much contraction in the economy. ``If you didn't have much contraction, you don't have much traction going forward,'' he told the Council on Foreign Relations. That's why ``it's very difficult to get very rapid recoveries.''
Building Permits
Housing makes up more than half of all U.S. construction and supports the economy through spending on building materials, furniture and appliances. Home construction subtracted 0.03 percentage point from third-quarter growth of 3.1 percent, after adding 0.1 percentage point in the second.
Building permits, a gauge of future construction, rose 1.7 percent to a 1.763 million annual rate. That's the highest in eight months, today's statistics showed.
Economists had expected starts to fall in October to 1.715 million units at an annual rate from a previously reported 1.843 million in September. The September rate was the highest since 1.833 million in December 1986.
October starts of single-family homes fell 7 percent to 1.350 million rate. Construction of apartments and other multifamily homes fell 29.3 percent to a 253,000 annual pace.
By region, starts fell in the South, Midwest and Northeast. They increased in the West.
Market Reaction
Treasury securities rose for a fourth day after the report. The 4 percent benchmark note maturing in November 2012 rose 1/8 point, pushing down the yield 2 basis points to 3.96 percent. A basis point is 0.01 percentage point. The Dow Jones Industrial Average rose 38 points, or 0.5 percent, while the Standard & Poor's index of 500 stocks increased 6 points, or 0.6 percent, at 11:11 a.m. New York time.
Fed policy makers reduced interest rates 12 times since the start of last year, helping push down mortgage rates. They're still falling. The 30-year fixed mortgage rate fell to 5.94 percent last week, the lowest since 1971, when Freddie Mac began keeping records.
Sales of new single-family homes rose in September to a record annual pace of 1.021 million, the Commerce Department said last month. Builders are likely to sell 953,000 new homes in 2002, exceeding last year's record 908,000, according to the National Association of Home Builders.
The group's homebuilder optimism index rose in November to the highest in two years. The index rose to 65 this month, the highest since November 2000, from 63 in October. Scores above 50 indicate that more builders view conditions as good than view them as poor.
Homebuilders
Centex Corp., the No. 2 U.S. homebuilder by stock market value, said yesterday that its sales for the first seven weeks of the quarter ending Dec. 31 were 27 percent higher than in the same period last year.
D.R. Horton Inc., the No. 4 U.S. homebuilder by stock market value, last week said that its fiscal fourth-quarter earnings rose a better-than-expected 57 percent and that profits will exceed analysts' estimates next year. Beazer Homes USA Inc. earlier this month reported a 3.9 percent gain in October orders, while KB Home saw a 14.8 percent jump.
Next year, home sales may total 931,000, according to the homebuilders' group. Starts are expected to decline to 1.63 million next year from 2002's 1.687 million, the group said.
By Monee Fields-White
Washington, Nov. 20 (Bloomberg) -- U.S. home construction fell in October to the lowest in six months, indicating a tapering off of the housing boom that's been a mainstay of the economy.
Builders broke ground on new homes at an annual pace of 1.603 million units last month, as construction of single-family homes and apartments and other multifamily structures declined, the Commerce Department said. Starts fell 11.4 percent from September's 1.810 million pace to the lowest since April.
Home construction ``did a pretty good job through the recession and the recovery,'' said David Seiders, chief economist at the National Association of Home Builders. The pace of construction ``will be easing off a bit to a plateau. So, don't keep thinking of housing as a growth engine for the economy.''
So far this year 1.444 million homes have been started, the strongest January-October period since 1986. While housing won't contribute much to economic growth in coming months, falling mortgage rates, record home sales and more building permits will probably keep the pace of construction elevated, economists said.
The October decline ``cannot be regarded as a symptom of any real weakening'' in housing, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
Federal Reserve Chairman Alan Greenspan said yesterday that last year's recession didn't create much contraction in the economy. ``If you didn't have much contraction, you don't have much traction going forward,'' he told the Council on Foreign Relations. That's why ``it's very difficult to get very rapid recoveries.''
Building Permits
Housing makes up more than half of all U.S. construction and supports the economy through spending on building materials, furniture and appliances. Home construction subtracted 0.03 percentage point from third-quarter growth of 3.1 percent, after adding 0.1 percentage point in the second.
Building permits, a gauge of future construction, rose 1.7 percent to a 1.763 million annual rate. That's the highest in eight months, today's statistics showed.
Economists had expected starts to fall in October to 1.715 million units at an annual rate from a previously reported 1.843 million in September. The September rate was the highest since 1.833 million in December 1986.
October starts of single-family homes fell 7 percent to 1.350 million rate. Construction of apartments and other multifamily homes fell 29.3 percent to a 253,000 annual pace.
By region, starts fell in the South, Midwest and Northeast. They increased in the West.
Market Reaction
Treasury securities rose for a fourth day after the report. The 4 percent benchmark note maturing in November 2012 rose 1/8 point, pushing down the yield 2 basis points to 3.96 percent. A basis point is 0.01 percentage point. The Dow Jones Industrial Average rose 38 points, or 0.5 percent, while the Standard & Poor's index of 500 stocks increased 6 points, or 0.6 percent, at 11:11 a.m. New York time.
Fed policy makers reduced interest rates 12 times since the start of last year, helping push down mortgage rates. They're still falling. The 30-year fixed mortgage rate fell to 5.94 percent last week, the lowest since 1971, when Freddie Mac began keeping records.
Sales of new single-family homes rose in September to a record annual pace of 1.021 million, the Commerce Department said last month. Builders are likely to sell 953,000 new homes in 2002, exceeding last year's record 908,000, according to the National Association of Home Builders.
The group's homebuilder optimism index rose in November to the highest in two years. The index rose to 65 this month, the highest since November 2000, from 63 in October. Scores above 50 indicate that more builders view conditions as good than view them as poor.
Homebuilders
Centex Corp., the No. 2 U.S. homebuilder by stock market value, said yesterday that its sales for the first seven weeks of the quarter ending Dec. 31 were 27 percent higher than in the same period last year.
D.R. Horton Inc., the No. 4 U.S. homebuilder by stock market value, last week said that its fiscal fourth-quarter earnings rose a better-than-expected 57 percent and that profits will exceed analysts' estimates next year. Beazer Homes USA Inc. earlier this month reported a 3.9 percent gain in October orders, while KB Home saw a 14.8 percent jump.
Next year, home sales may total 931,000, according to the homebuilders' group. Starts are expected to decline to 1.63 million next year from 2002's 1.687 million, the group said.
