U.S. Housing Starts Probably Fell to 17-Year Low in September

By Bob Willis
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Oct. 17 (Bloomberg) -- U.S. builders probably broke ground in September on the fewest houses in 17 years, a sign the real- estate market deteriorated even before the recent credit meltdown, economists said before a report today.

Housing starts fell 2.6 percent last month to an annual rate of 872,000, according to the median forecast in a Bloomberg News survey of 74 economists. Another report may show consumer sentiment fell in October for the first time in four months.

Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made qualifying for a mortgage more difficult. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.

``Housing starts will show declines in coming months due to the credit crisis and the weak economy,'' said Terrin Griffiths, an economist at the California Credit Union League in Rancho Cucamonga, California. ``The housing market is continuing to struggle toward a bottom.''

The Commerce Department's report on starts is due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 840,000 to 935,000 units.

Building permits, a sign of future construction, probably fell 2 percent to an 840,000 pace, according to the survey.

At 10 a.m., the Reuters/University of Michigan preliminary estimate of October consumer sentiment probably fell to 65 from 70.3 at the end of September, according to the survey median.

Renewed Slump

The biggest housing slump in a generation was showing signs of nearing a bottom when financial markets began to implode in September, leading to the government takeover of mortgage finance companies Freddie Mac and Fannie Mae, the failure of banks and a $700 billion government rescue plan this month. Recent events are likely delaying any return to stability.


``These things are putting a new nail'' in the housing market's coffin, David Seiders, chief economist at the National Association of Homebuiders, said in an interview on Bloomberg Television yesterday. ``This sort of vicious feedback loop is still in play.''

The National Association of Home Builders/Wells Fargo index of builder confidence decreased in October to its lowest level since records began in 1985, the Washington-based association said yesterday.

Combined sales of new and existing homes have fallen 36 percent from their peaks in mid-2005. Home construction has declined 61 percent from a peak in January 2006. The supply of unsold homes on the market remains above 10 months' worth of sales, signaling homebuilding is likely to continue falling.

Declining Prices

Home prices in major cities are down an average of 20 percent from their mid-2006 peak after nearly doubling in the prior six years, according to research by Yale University economist Robert Shiller.

Falling prices are contributing to the jump in foreclosures as Americans, trying to refinance adjustable-rate loans, find out they owe more than their homes are worth. The drop in prices also means owners can't tap home equity for extra cash, one reason behind the slowdown in consumer spending.

Homebuilders are still reeling. Lennar Corp., the second- largest U.S. homebuilder, on Sept. 23 reported its sixth straight quarterly loss as potential buyers struggled to get mortgages and rising foreclosures increased the supply of homes on the market.

``The weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards,'' Chief Executive Officer Stuart Miller said in a statement.

Bloomberg Survey

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Housing BuildingU of Mich
Starts Permits Conf.
,000's ,000's Index
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Date of Release 10/17 10/17 10/17
Observation Period Sept. Sept. Sept. F
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Median 872 840 65.0
Average 875 843 65.3
High Forecast 935 910 74.1
Low Forecast 840 820 55.0
Number of Participants 74 48 60
Previous 895 857 70.3
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4CAST Ltd. 840 840 64.5
Action Economics 880 830 70.5
Aletti Gestielle SGR 850 845 65.0
Allianz Dresdner Economic 860 --- ---
Argus Research Corp. 890 --- 55.0
Banc of America Securitie 840 --- ---
Bank of Tokyo- Mitsubishi 859 825 74.1
Bantleon Bank AG 870 830 66.0
Barclays Capital 875 --- 65.0
BMO Capital Markets 868 835 66.0
BNP Paribas 852 --- 60.0
Briefing.com 880 845 68.0
Calyon 875 --- 66.7
CFC Group 870 830 64.0
CIBC World Markets 850 820 63.0
Citi 870 840 65.0
ClearView Economics 910 --- ---
Commerzbank AG 880 850 65.0
Credit Suisse 870 --- 62.0
Daiwa Securities America 870 --- 60.0
Danske Bank 890 856 68.0
DekaBank 890 850 64.0
Desjardins Group 850 870 66.0
Deutsche Bank Securities 850 840 60.0
Deutsche Postbank AG 880 --- 68.0
Dresdner Kleinwort 875 --- ---
DZ Bank 880 845 68.0
First Trust Advisors 873 --- 67.0
FTN Financial 875 --- 63.0
Global Insight Inc. 850 866 60.0
Goldman, Sachs & Co. 917 --- ---
H&R Block Financial Advis 880 835 63.0
Helaba 870 840 67.0
High Frequency Economics 900 --- 70.0
Horizon Investments 855 830 60.0
HSBC Markets 850 850 65.0
IDEAglobal 885 845 67.0
ING Financial Markets 870 820 ---
Insight Economics 910 --- 65.0
Intesa-SanPaulo 850 840 60.0
J.P. Morgan Chase 870 830 64.0
Janney Montgomery Scott L 891 853 ---
Landesbank Berlin 860 840 61.0
Landesbank BW 880 845 69.0
Lloyds TSB 880 840 70.0
Maria Fiorini Ramirez Inc 900 --- ---
Merk Investments 868 822 63.0
Merrill Lynch 855 820 63.0
MFC Global Investment Man 865 830 66.5
Moody's Economy.com 910 860 63.0
Morgan Stanley & Co. 870 --- ---
National City Corporation 910 850 68.8
Natixis 850 --- 63.0
Newedge --- --- 67.0
Nomura Securities Intl. 935 910 ---
Nord/LB 890 850 68.5
Okasan Securities 880 --- ---
PNC Bank 900 --- ---
RBS Greenwich Capital 870 --- 65.0
Ried, Thunberg & Co. 880 857 66.0
Schneider Trading Associa 910 855 68.0
Scotia Capital 850 840 ---
Societe Generale 900 --- ---
Standard Chartered 870 830 67.0
Stone & McCarthy Research --- --- 65.0
TD Securities 880 850 65.0
Thomson Financial/IFR 870 845 70.0
Tullett Prebon 870 --- 67.0
UBS Securities LLC 850 --- 59.0
Unicredit MIB 875 850 ---
University of Maryland 865 845 69.0
Wachovia Corp. 895 --- ---
Wells Fargo & Co. 880 830 65.0
WestLB AG 850 840 67.5
Westpac Banking Co. 859 840 67.0
Wrightson Associates 880 850 70.0
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To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.