Instant View: Housing starts, permits rebound in March (Reuters)

NEW YORK (Reuters) – U.S. housing starts and permits for future home construction rose more than expected in March, snapping back from the prior month's winter depressed levels, government data showed on Tuesday.

KEY POINTS:

* The Commerce Department said housing starts rose 7.2 percent to a seasonally adjusted annual rate of 549,000 units. * February's starts were revised up to a 512,000-unit pace from the previously reported rate of 479,000 units. * Economists polled by Reuters had forecast housing starts rising to a 520,000-unit rate. Compared to March last year, residential construction was down 13.4 percent.

COMMENTS:

SIREEN HARAJLI, ECONOMIST, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, NEW YORK

"The figures were slightly above expectations. However it's mainly a rebound from previous month's decline. We still think the housing market is very weak, and the high inventory is still depressing sales and prices.

"We hope to see some signs of improvement toward the end of the year, but we won't see substantial improvement until 2012."

ALEX HODER, ECONOMIC ANALYST, FTN FINANCIAL, NEW YORK

"The problem is the numbers are so low to begin with that you see these huge month-to-month percentage changes but the number is close to relatively what they've been.

"This time last year was right after the first-time home buyers tax credit so you're comparing these numbers to a high level of volatility.

"It's just another data point drifting sideways."

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

"The seasonally annualized rate of 549,000 houses started in March represents a 7.2 percent increase from February's 512k (originally 479k), but is still 12.6 percent below January's spike to 628k. Although small in magnitude, any gain will suffice given February permits had sank to what was originally thought to be a record low of 517k.

"Therefore the slightest increase in volume is good news. Permits (revised last month to a smaller decline of 534k from 563k) also rebounded in March, rising to 594,000 permits issued. Both single-family homes and multi-units supported permits and starts, which are both down a little over 13% over the past twelve months.

"Yet another housing report indicating prevalent obstacles in the sector preventing advancements on which to meaningfully comment. May's report (reflecting April's number) will reflect the same.

MARKET REACTION:

STOCKS: U.S. stock index futures steady at higher levels.

BONDS: U.S. bond prices steady at lower levels.

FOREX: The dollar steady at lower levels versus the euro.

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New-home construction increases 7.2 pct. in March (AP)

By DEREK KRAVITZ, AP Real Estate Writer Derek Kravitz, Ap Real Estate Writer – Tue Apr 19, 2:52 pm ET

WASHINGTON – Builders broke ground on more new homes last month, giving the weak housing market a slight boost at the start of the spring buying season.

Home construction rose 7.2 percent in March from February to a seasonally adjusted 549,000 units, the Commerce Department said Tuesday. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.

Still, the building pace is far below the 1.2 million units a year that economists consider healthy. And March's improvement came after construction fell in February to its second-lowest level on records dating back more than a half-century.

Millions of foreclosures have forced home prices down. In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. And more foreclosures are expected this year. Tight credit has made mortgage loans tough to get. Many would-be buyers who could qualify for loans are reluctant to shop, fearing that prices will fall even further.

A sign of the battered industry is the number of new homes finished and ready to sell dropped in March to a seasonally adjusted 509,000 units, the lowest level on records dating back to 1968. And the number of homes now under construction has fallen to a four-decade low.

"Housing starts remain at an extraordinarily depressed level," said Dan Greenhaus, chief economic strategist at Miller Tabak + Co. "To put this in further perspective, a doubling of (new homes) from here would still put starts at the lowest level of any other recession." During previous housing recessions, in the early 1980s and 90s, new home construction fell to more than 1 million homes per year. This year's pace is slightly more than half those levels.

And the lack of any meaningful rebound in housing is stunting the broader economic recovery. In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. In the first post-recession year, between 2009 and 2010, housing only contributed 4 percent to economic growth.

Since the mid-part of last year, home construction and sales have instead detracted from the economy. Joshua Shapiro, chief U.S. economist at MFR Inc., said that's a "large reason for the sub-par nature" of the rebound. New-home construction is down 6 percent since the recession ended nearly two years ago.

Single-family homes, which make up roughly 80 percent of home construction, rose 7.7 percent in March. Apartment and condominium construction rose 14.7 percent. Building permits increased to its highest level since December, spurred by a more than 28 percent jump in permits granted for apartment and condo buildings.

That increase in permits could signal a turnaround in the coming months, said Steven A. Wood, chief economist with Insight Economics. New homes typically take six months to build and the number of new permits is higher than the number of homes starting construction.

The increase in home construction activity was felt in most regions of the country. It rose 32.3 percent in the Midwest, 27.6 percent in the West and 5.4 percent in the Northeast. Construction fell 3.3 percent in the South.

New homes can spur job growth. Each new home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

The trade group said Monday that its index of industry sentiment for April fell one notch, to 16. That followed a one-point increase in March and four straight months of 16 readings. Any reading below 50 indicates negative sentiment about the housing market's future and the index hasn't been above that level since April 2006.

Most economists expect home prices — and by extension home sales and construction — to slip even further in 2011 before a modest recovery takes hold.

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