Recall, if you will, the real estate/wealth effect discussion from August. I took short positions at the time in some builders and still hold them. No reason to cover them anytime soon, I suppose.
Kb
U.S. August Housing Starts Drop to 1.527 Million Rate (Update2)
By Brendan Murray and Carlos Torres
Washington, Sept. 20 (Bloomberg) -- U.S. home construction fell in August to the slowest pace in 10 months, ahead of last week's terrorist attacks that may damp consumer confidence and slow home sales.
Builders started 1.527 million homes at an annual rate in August, down 6.9 percent from a revised 1.641 million-unit pace the previous month, the Commerce Department said. The August pace was the weakest since October of last year.
A jobless rate that's risen to a four-year high of 4.9 percent is making people cautious about buying homes even with mortgage rates falling.
``It now appears that housing is slowing along with the rest of the economy,'' said Steve Wood, chief economist at FinancialOxygen Inc. in Walnut Creek, California. ``Further weakness is expected as last week's terrorist attacks derail consumer confidence.''
The economy grew in the second quarter at a 0.2 percent annual rate, the slowest in eight years, according to the government. First-time claims for state unemployment insurance fell last week, partly because the shock of terrorist attacks led Americans to put off submitting applications. Initial jobless claims fell by 49,000 to 387,000 in the week that ended Saturday.
The terrorist attacks may have had an effect, because ``in a disaster, filing for unemployment insurance is not the top priority for most people,'' a Labor Department spokeswoman said. The impact on claims ``is to come.''
More Job Cuts
Hijackers crashed three planes into the World Trade Center and the Pentagon Sept. 11, the worst terrorist attack in U.S. history. Since then, AMR Corp., Continental Airlines Inc. and other companies have announced plans to dismiss or lay off workers as Americans become afraid to fly. Analysts say the job losses are likely to spread.
Economists surveyed by Bloomberg News had expected starts to fall 4.2 percent in August to 1.63 million units at an annual rate from the previously reported 1.672 million units in July.
Starts of single-family homes dropped 2.4 percent in August to a 1.247 million-unit rate. August starts of multifamily homes, including apartments and townhouses, plunged 22.9 percent to a 280,000-unit annual rate.
Building permits, an indicator of future construction, fell 0.7 percent to 1.56 million units at an annual rate after decreasing 1 percent in July. Permits for single-family and multifamily construction dropped.
August housing completions, meantime, rose 0.2 percent to 1.577 million units at an annual rate after falling 4.2 percent a month earlier.
Starts by Region
By region, starts plunged 14 percent in the South to 666,000 units at an annual pace, 3.7 percent in the West to 367,000 units, and 7.7 percent in the Northeast to 155,000. Starts rose 6.6 percent in the Midwest to 339,000 units at an annual rate.
Even with the decline, starts have averaged 1.593 million units at an annual rate so far this year. That's more than the 1.569 million started last year and close to the record 1.641 million for all of 1999.
In its regional report on the U.S. economy, the Federal Reserve yesterday said home sales were ``relatively steady at high levels in most of the country'' in August and early September. ``Residential real estate markets were described as `brisk,' `strong' or `steady' in most reports, buoyed in large part by low mortgage rates,'' the Fed said in its report.
The average rate on a 30-year mortgage fell to a 2 1/2-year low of 6.86 percent in the week ended Sept. 14, according to data from Freddie Mac, the No. 2 buyer of U.S. mortgages. The rate averaged 8.05 percent last year.
Federal Reserve
Fed policy makers have reduced their benchmark overnight bank lending rate eight times this year to help bolster a sluggish economy. That's keeping borrowing costs low. On Monday, central bankers reduced the rate to 3 percent, the lowest since February 1994.
The Fed's latest half-point reduction in the overnight bank lending rate ``should have a positive impact on the housing industry and the economy in general,'' said Robert Toll, chairman of Toll Brothers Inc., the No. 1 builder of luxury homes.
Still, Tuesday's terrorist attack on New York's World Trade Center and the Pentagon in Washington may damp consumer confidence and demand for new homes. Consumer confidence fell to an 8 1/2- year low before terrorists attacked the U.S. The preliminary Michigan index of consumer sentiment for September fell to 83.6, the lowest since March 1993, from August's 91.5.
An index of optimism among U.S. homebuilders fell in September to the lowest level in eight months. The National Association of Home Builders' housing market index dropped to 55 this month, the group said yesterday.
Effect of Attack
``There had been some retrenchment in buyer demand to still- solid levels seen earlier this year,'' said Bruce Smith, president of the trade group and a builder from Walnut Creek, California. ``We are monitoring the situation closely and should have a better idea of what kind of effects these events will have on consumer confidence, employment, and home buyer demand in the next several weeks.''
New home sales rose 4.9 percent in July to the fastest pace in four months, according to the latest Commerce Department figures. The pace of sales suggests 2001 may be the best on record for the industry.
Ryland announced earlier this month that new home orders were 4.7 percent more in August than they were in the same month last year. The Calabasas, California-based builder reported 945 orders last month, compared with 903 orders in August 2000. In the last eight months, Ryland's orders were 15.5 percent higher than the same period last year. |
