Builders probably began work on fewer houses in July, showing residential real estate is failing to contribute to US growth two years into an economic recovery, economists said before a report today.Housing starts fell 4.6 per cent to a 600,000 annual rate, according to the median estimate of 77 economists surveyed by Bloomberg News. Another report may show factory production rose as auto making began to bounce back from the disaster in Japan.Falling sales, foreclosures and a lack of jobs may keep delaying a rebound in homebuilding, depriving the world’s largest economy of a source of strength seen in the early stages of past recoveries. Concern over housing is prompting banks to maintain strict mortgage lending rules and was one reason the Federal Reserve said it would hold borrowing costs at a record low until at least mid-2013.
“Housing is going nowhere fast,” said Joshua Shapiro, chief US economist at Maria Fiorini Ramirez Inc. in New York. “Demand is just really not there, and there’s an overwhelming supply of unsold homes.”The homebuilding report is due from the Commerce Department at 8:30 a.m. in Washington. Survey estimates ranged from 570,000 to 650,000, after a 629,000 pace in June that was the highest level in five months.The median projection compares with last year’s tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959. During the past decade’s housing boom, starts reached a peak of 2.07 million in 2005.Building permits, a proxy for future construction, may have fallen 1.9 per cent to a 605,000 annual rate from 617,000 in June, according to the Bloomberg survey.Labour Department figures, also due at 8:30 am, may show the import-price index fell 0.1 per cent last month, the second straight decline as commodity prices dropped, according to the Bloomberg News survey median.
At 9:15 am, the Fed may report industrial production grew 0.5 per cent in July after a 0.2 per cent gain in June, according to the survey median. Economists’ forecasts ranged from 0.1 per cent to 1 per cent. Manufacturing, included in the industrial output report, accounts for about 12 per cent of the economy.The output figures may also reflect a jump in utility use as temperatures soared across the US, with July records in Texas and Oklahoma, according to the National Climatic Data Center. Last month was the fourth-warmest July in 117 years, it said.
“Industrial production improved a bit after supply disruptions eased and it got a boost from utilities last month,” said Shapiro. “But the manufacturing sector is cooling from an unsustainably strong pace as economies around the world are slowing. We have a very weak economy.” Builders have little incentive to take on more work. Combined sales of new and previously owned homes dropped in June to the lowest level of the year, according to reports from the Commerce Department and the National Association of Realtors.
The median price of a single-family house dropped in 109 out of 150 metropolitan areas in the second quarter as foreclosures devalued real estate, the Realtors group said in a report on Aug.10.“The housing sector remains depressed,” the Federal Open Market Committee said in a statement after its meeting on Aug.9. “Economic growth so far this year has been considerably slower than the Committee had expected.”
Bank-lending standards on home mortgages were little changed for both prime and non-traditional loans during the second quarter, the Fed said yesterday in its survey of senior loan officers. In addition, about three-quarters of banks said they expected the pace of mortgage lending “to remain at about the same level through the rest of 2011,” the Fed said.
The banks cited “reduced or unchanged demand from creditworthy borrowers” as a factor. They also pointed to “unfavorable or uncertain forecasts for the broad economy and for house prices.”
From / Gulf Today