By Bob Willis
Sept. 17 (Bloomberg) -- U.S. builders broke ground in August on the fewest new homes in 17 years, signaling the worst housing recession in a generation will continue to weigh on growth in coming months, economists said before a report today.
Housing starts fell 1.6 percent in August to an annual rate of 950,000, according to the median forecast in a Bloomberg News survey of 74 economists. Building permits, a sign of future construction, probably fell 1 percent to a 928,000 pace.
Builders will probably keep scaling back as stricter lending and record foreclosures swell the number of properties on the market. The housing and credit meltdowns that led to the collapse of Lehman Brothers Holdings Inc. may continue to subtract from economic growth for the rest of the year and into next.
``Starts need to drop further to work off that excess inventory,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``Credit will become tighter again.''
The Commerce Department's report on starts is due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 893,000 to 1.04 million units.
Another report from the Commerce Department at the same time may show the current-account deficit in the second quarter widened to $180 billion from $176.4 billion in the previous three months, according to economists surveyed by Bloomberg.
The credit crunch spawned by the subprime mortgage crisis forced Lehman Brothers this week to file for bankruptcy, just a week after the government took over Fannie Mae and Freddie Mac, the two biggest buyers of mortgages.
Fed Policy
Federal Reserve policy makers yesterday left the benchmark interest rate unchanged at 2 percent for a third consecutive meeting. Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending.
As banks tighten borrowing rules and confidence slumps, consumer spending is faltering. Retail sales in August dropped for a second month, Commerce reported last week.
Homebuilders remain gloomy. A report yesterday from the National Association of Home Builders/Wells Fargo showed confidence among U.S. homebuilders in September held near the lowest level since records began in 1985.
As home prices continue to fall, more and more Americans are forced into foreclosure as they owe more than their homes are worth. Stricter lending rules also limit opportunities to refinance out of adjustable-rate mortgages before they reset higher.
Foreclosure filings rose to a record in August, RealtyTrac Inc. said Sept. 12. One in 416 U.S. households got a default notice, was warned of a pending auction or was foreclosed upon.
Toll Brothers Inc., the largest U.S. luxury homebuilder, on Sept. 4 reported a fourth straight quarterly loss.
``Explosive energy price increases, rising unemployment and severe mortgage and credit'' conditions cut demand, Chief Executive Officer Robert Toll said on a conference call. ``Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers' market.''
Bloomberg Survey
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Housing Building Current
Starts Permits Account
,000's ,000's $ Blns
================================================================
Date of Release 09/17 09/17 09/17
Observation Period Aug. Aug. 2Q
----------------------------------------------------------------
Median 950 928 -180.0
Average 951 926 -180.8
High Forecast 1040 960 -169.0
Low Forecast 893 885 -188.1
Number of Participants 74 49 44
Previous 965 937 -176.4
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4CAST Ltd. 950 920 -186.5
Action Economics 950 950 -179.0
Aletti Gestielle SGR 948 940 -178.0
Allianz Dresdner Economic 940 --- ---
Argus Research Corp. 970 --- ---
Banc of America Securitie 950 --- -179.0
Bank of Tokyo- Mitsubishi 955 916 -177.4
Bantleon Bank AG 960 937 ---
Barclays Capital 950 --- -183.0
BMO Capital Markets 940 910 -180.0
BNP Paribas 950 --- ---
Briefing.com 950 930 ---
Calyon 945 928 -188.1
CFC Group 955 930 -180.0
CIBC World Markets 920 900 -180.0
Citi 925 925 -179.0
ClearView Economics 950 --- ---
Commerzbank AG 950 900 ---
Credit Suisse 950 --- ---
Daiwa Securities America 900 --- -182.0
Danske Bank 946 937 ---
DekaBank 960 930 -179.3
Desjardins Group 940 930 -180.0
Deutsche Bank Securities 950 950 -180.0
Deutsche Postbank AG 960 --- ---
Dresdner Kleinwort 945 --- -178.0
DZ Bank 950 945 ---
First Trust Advisors 961 --- -182.2
Fortis 1000 --- ---
FTN Financial 950 930 ---
Global Insight Inc. 893 891 ---
Goldman, Sachs & Co. 989 --- -182.5
H&R Block Financial Advis 955 930 ---
Helaba 980 932 -180.0
High Frequency Economics 925 900 -183.0
HSBC Markets 970 950 -181.0
IDEAglobal 955 925 -180.0
Insight Economics 950 --- -178.0
Intesa-SanPaulo 1000 900 ---
J.P. Morgan Chase 930 910 -180.0
Janney Montgomery Scott L 945 921 ---
JPMorgan Private Client 930 920 ---
Landesbank Berlin 950 920 ---
Landesbank BW 940 915 ---
Lehman Brothers 920 900 -176.5
Lloyds TSB 960 930 -183.2
Maria Fiorini Ramirez Inc 925 --- ---
Merk Investments 985 920 -179.7
Merrill Lynch 900 885 -184.3
Moody's Economy.com 950 930 -181.6
Morgan Stanley & Co. 920 --- ---
National Bank Financial 960 935 ---
National City Corporation 1040 940 -186.2
Natixis 940 --- -185.0
Nomura Securities Intl. 985 925 ---
Okasan Securities 975 --- ---
PNC Bank 965 --- ---
RBS Greenwich Capital 930 --- ---
Ried, Thunberg & Co. 935 925 -186.0
Schneider Trading Associa 970 946 ---
Scotia Capital 960 --- ---
Societe Generale 980 --- -178.0
Standard Chartered 940 920 -180.0
Stone & McCarthy Research 950 --- -188.0
TD Securities 960 950 ---
Thomson Financial/IFR 958 942 -182.0
UBS Securities LLC 925 --- -179.4
Unicredit MIB 950 950 -169.0
University of Maryland 970 960 -179.5
Wachovia Corp. 960 --- -181.0
Wells Fargo & Co. 950 950 -183.0
WestLB AG 950 925 -178.0
Westpac Banking Co. 930 890 -175.0
Wrightson Associates 930 920 -182.0
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To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.
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