Jan. 17 (Bloomberg) — Builders in the U.S. broke ground in
December on fewer houses than forecast, making last years
decline in homebuilding the worst in almost three decades.
The 14 percent decrease to an annual rate of 1.006 million,
the lowest since 1991, followed a 1.173 million pace the prior
month, the Commerce Department said today in Washington. For all
of 2007, starts were down 25 percent, the biggest decline since
1980, to 1.354 million.
Building permits, a sign of future construction, declined
by the most in 12 years, suggesting the housing slump will
deepen as it enters a third year. Rising foreclosures will throw
even more houses onto the market, hurting property values and
threatening to push the economy into recession, economists said.
“Housing is getting punished by credit-market problems
just as much as the economy is, said Adam York, an economist
at Wachovia Corp. in Charlotte, North Carolina, who had forecast
a decline to a 1.07 million pace. “We expect this pressure to
continue into 2008.
Initial claims for unemployment insurance unexpectedly
dropped to a three-month low, the Labor Department said
separately today. Jobless claims declined by 21,000 to 301,000
in the week ended Jan. 12.
Economists Forecasts
Housing starts were projected to fall to a 1.145 million
pace from a previously reported 1.187 million rate in November,
according to the median forecast of 74 economists polled by
Bloomberg News. Estimates ranged from 1.05 million to 1.2
million.
Permits fell 8.1 percent to a 1.068 million annual rate,
bringing 2007s decline to 25 percent, the biggest since 1974.
Permits were forecast to drop to a 1.135 million annual pace,
according to the survey median, after 1.162 million. Projections
ranged from 1.05 million to 1.17 million.
Construction of single-family homes decreased 2.9 percent
to a 794,000 rate, todays report showed. Work on multifamily
homes, such as townhouses and apartment buildings, plunged 40
percent to an annual rate of 212,000 from the prior month.
The decrease in starts was led by a 31 percent slump in the
Midwest and a 26 percent decline in the Northeast.
Federal Reserve policy makers, including Chairman Ben S.
Bernanke, have signaled they may take more aggressive action in
response to the increasing risk of slower growth. Central
bankers are likely to cut interest rates by half a percentage
point when they meet this month, according to futures trading.
Bernanke to Speak
Bernanke will testify on the economic outlook before the
House Budget Committee at 10:00 a.m. today.
“The demand for housing seems to have weakened further, in
part reflecting ongoing problems in mortgage markets, Bernanke
said in a speech in Washington on Jan. 10. “We also see
considerable evidence that banks have become more restrictive in
their lending to firms and households.
New home sales will probably fall another 15 percent this
year after tumbling an estimated 26 percent in 2007, according
to a forecast from the Mortgage Bankers Association, the
industrys largest trade group. Sales of existing homes will
fall 13 percent this year, the group said.
“Conditions continue to be challenging in our markets and
are expected to remain so throughout 2008, Robert
Schottenstein, chief executive officer of M/I Homes Inc., a
homebuilder in the Midwest, Florida and Mid-Atlantic states,
said in a statement on Jan. 10. The Columbus, Ohio-based company
said that sales fell in the fourth quarter.
To contact the reporter on this story:
Shobhana Chandra in Washington
