By Timothy R. Homan
July 17 (Bloomberg) -- Builders probably broke ground in June on the fewest houses in 17 years, signaling the real- estate recession will keep hurting growth, economists said ahead of a government report today.
Housing starts fell to a 960,000 annual pace last month, the weakest since March 1991, from 975,000 in May, according to the median of 76 forecasts in a Bloomberg News survey. Building permits, a sign of future construction, probably fell to a 965,000 rate from 978,000.
Builders are cutting back as rising foreclosures, higher mortgage rates and declining property values threaten to depress home sales further. The slump in financial markets brought on by mounting subprime losses may prompt lenders to choke off credit, making the situation even worse.
``Mortgage rates have edged higher and distress in financial markets has escalated, keeping potential buyers on the sidelines,'' said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York. ``Until the supply comes down, builders would rather cut construction.''
The Commerce Department's report on starts is due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from annual rates of 925,000 to 1.03 million.
Other reports today are projected to show first-time claims for jobless benefits rebounded last week and manufacturing in the Philadelphia region contracted in July for an eighth month.
Hurting Economy
Declines in construction will probably limit economic growth, even as tax rebates give consumer spending a boost. Residential building dropped at a 24.6 percent pace in the first quarter and subtracted 1.1 percentage points from growth.
Federal Reserve Chairman Ben S. Bernanke this week abandoned his June assessment that the threat of an economic downturn had diminished. During testimony before U.S. lawmakers in Washington he also said that ``upside risks to the inflation outlook have intensified.''
A report yesterday from the National Association of Home Builders/Wells Fargo showed confidence among U.S. homebuilders in July dropped to the lowest level since records began in 1985.
Concern over the ability of Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, to withstand the subprime lending meltdown has heightened the credit crisis and may further limit access to loans.
Foreclosures Jump
Foreclosure filings rose 53 percent in June and bank seizures increased a record 171 percent from a year ago, RealtyTrac Inc., a seller of default data, said last week in a statement. The Irvine, California-based company began collecting statistics on default notices, warnings of scheduled auction and repossessions in January 2005.
One in every 500 U.S. households has entered a stage of the foreclosure process, RealtyTrac said.
M/I Homes inc., a homebuilder concentrating in the Midwest, Florida and the Mid-Atlantic states, said July 10 it delivered 478 homes in the second quarter, down from 755 in the same period in 2007. The Columbus, Ohio-based company said the number of new contracts fell to 530, from 688.
Bloomberg Survey
==============================================================
Housing Building Initial Philly
Starts Permits Claims Fed
,000's ,000's ,000's Index
==============================================================
Date of Release 07/17 07/17 07/17 07/17
Observation Period June June 13-Jul July
--------------------------------------------------------------
Median 960 965 380 -15.0
Average 964 962 379 -15.4
High Forecast 1030 980 414 -5.0
Low Forecast 925 925 350 -22.0
Number of Participants 76 47 41 56
Previous 975 978 346 -17.1
--------------------------------------------------------------
4CAST Ltd. 960 960 400 -17.5
Action Economics 970 970 360 -12.0
AIG Investments 1006 --- --- -12.5
Aletti Gestielle SGR 960 965 375 -13.5
Analytical Synthesis 925 965 --- ---
Argus Research Corp. 1000 --- --- -5.0
Banc of America Securitie 970 --- --- -15.0
Bank of Tokyo- Mitsubishi 988 939 379 -9.0
Bantleon Bank AG 960 975 --- -16.0
Barclays Capital 960 --- 380 -15.0
BBVA 950 950 380 -19.2
BMO Capital Markets 956 958 380 -15.0
BNP Paribas 935 --- --- -22.0
Briefing.com 985 980 --- -15.0
Calyon 960 965 --- -14.0
CFC Group 940 940 405 -17.0
CIBC World Markets 968 960 --- ---
Citi 970 970 380 -15.0
ClearView Economics 990 --- --- ---
Commerzbank AG 950 960 405 -16.0
Credit Suisse 960 --- 390 ---
Daiwa Securities America 970 --- --- ---
Danske Bank 950 --- --- -12.0
DekaBank 955 960 --- -18.0
Desjardins Group 950 925 376 -14.0
Deutsche Bank Securities 960 970 385 -18.0
Deutsche Postbank AG 975 --- --- ---
Dresdner Kleinwort 960 --- --- -14.0
DZ Bank 970 975 --- -17.1
First Trust Advisors 960 --- 365 -15.6
Fortis 975 --- --- -12.0
FTN Financial 970 970 --- -12.0
Global Insight Inc. 952 939 --- ---
Goldman, Sachs & Co. 975 --- --- ---
Helaba 960 965 --- -17.0
High Frequency Economics 960 950 400 -17.1
Horizon Investments 970 --- --- ---
HSBC Markets 990 975 380 -12.0
IDEAglobal 960 970 380 -14.0
ING Financial Markets 960 --- 385 -17.0
Insight Economics 960 --- 400 -19.0
Intesa-SanPaulo 970 970 --- -15.0
J.P. Morgan Chase 930 --- 375 -15.0
Janney Montgomery Scott L 962 970 --- ---
JPMorgan Private Client 970 970 350 -18.0
Landesbank Berlin 940 960 390 -12.0
Lehman Brothers 965 930 385 -17.1
Lloyds TSB 970 970 365 -14.5
Maria Fiorini Ramirez Inc 985 --- 375 ---
Merk Investments 961 979 380 -18.4
Merrill Lynch 955 973 414 -14.0
Moody's Economy.com 958 962 375 -17.0
Morgan Stanley & Co. 960 --- --- ---
National Bank Financial 960 --- --- ---
National City Corporation 1030 951 --- -11.4
Natixis 960 --- --- ---
Newedge --- --- --- -16.0
Nomura Securities Intl. 970 965 --- -12.0
Nord/LB 960 960 350 -13.0
Okasan Securities 990 --- --- ---
PNC Bank 970 --- --- ---
RBS Greenwich Capital 940 --- --- ---
Ried, Thunberg & Co. 960 969 365 -18.0
Schneider Trading Associa 955 968 383 -16.8
Scotia Capital 950 930 375 -18.0
Standard Chartered 955 970 --- -17.5
Stone & McCarthy Research 965 --- 380 -19.7
TD Securities 960 --- 390 ---
Thomson Financial/IFR 960 950 365 -21.5
UBS Securities LLC 950 --- 365 -15.0
Unicredit MIB 960 960 380 ---
University of Maryland 965 970 380 ---
Wachovia Corp. 950 --- --- ---
Wells Fargo & Co. 970 970 360 -12.0
WestLB AG 980 975 --- -15.0
Westpac Banking Co. 956 978 380 -19.0
Wrightson Associates 960 950 365 -18.0
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To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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