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Wednesday, March 18, 2009

US housing starts, permits post unexpected jump



US home construction starts and permits saw a surprise jump in February from 50-year low levels in a positive sign for the moribund home market at the epicenter of global financial crisis.

Housing starts -- or privately owned new homes on which construction has started -- soared 22.2 percent to a seasonally adjusted annual rate of 583,000 units after seven months of decline, the Commerce Department said.

It was much higher than the revised January estimate of 477,000 and consensus forecast of 450,000.

Permits to build new homes, an indicator of future activity in the housing sector, rose three percent to a seasonally adjusted annual rate of 547,000 in February, the department said.

It was above the revised January rate of 531,000 and consensus forecast of 500,000.

Starts and permits were at their lowest pace in January since the Commerce Department began tracking the data in 1959.

A home mortgage meltdown triggered financial turmoil and plunged the world's biggest economy into recession in December 2007.

Analysts were baffled by the rise in housing starts led by the notoriously volatile multifamily segment and aided by weather conditions, saying they do not see concrete signs of recovery in the housing market yet.

The real good news, they said, was the slight recovery in single-family building permits -- for the first time in nine months -- and the stabilization in single-family starts.

The leap in starts propelled by an 82.3 percent surge in multifamily sector reversed almost all the drop in starts over the previous three months, analysts noted.

"We see no specific factor that might explain this jump; multifamily starts are always noisy but this is exceptional," said Ian Shepherdson of High Frequency Economics.

"With new home sales still falling and the (inventory) at a record (high) there is no reason for homebuilding to rise," he said.

"This is a temporary rebound, not a recovery, though it likely means the post-Lehman crash is over."

The September 2008 collapse of Lehman Brothers, one of Wall Street's most established investment banks, on the heels of the home mortgage crisis sparked turmoil on financial markets across the world.

The latest figures showed that the increase in housing activity was concentrated in the wealthiest Northeast region, where starts jumped 89 percent.

Analysts were also unsure whether this month's gain -- even at a more measured pace -- can be sustained in March although they believed a near 800-billion-dollar stimulus package and home foreclosure mitigation plan by President Barack Obama's administration could help stabilize the housing market by year's end.

Under a home ownership affordability plan launched this month, house owners facing foreclosures can get home loan interest rates lowered.

The February figures were "clearly not a sign of an upturn in the sector but could be at best considered as a first sign of stabilization," Marie-Pierre Ripert of Natixis said.

"We will wait for these data to be confirmed in the months ahead before changing our view on the real estate market," Ripert said.

Ryan Sweet of Moody's Economy.com expects total housing starts to trough in the second quarter of 2009 but remain at depressed levels well into 2011.

"We still believe that housing starts and permits have further to fall because the outlook facing builders continues to deteriorate," said IHS Global Insight's Patrick Newport, citing double digit falls in home prices, near all-time unsold home inventories and rising foreclosures.

"If financial markets improve, and banks ramp up lending, the housing market should hit bottom later this year."