Housing Starts in U.S. Probably Fell to Record Low in December

By Timothy R. Homan

Jan. 22 (Bloomberg) -- U.S. builders probably broke ground in December on the fewest houses since record-keeping began as sales and credit dried up, economists said before a government report today.

Housing starts fell 3.2 percent last month to an annual rate of 605,000, the lowest level since the Commerce Department started compiling data in 1959, according to the median estimate in a Bloomberg News survey. Building permits, a sign of future projects, also probably dropped to a record low.

Builders, whose shares have lost 76 percent of their value over the last three years, are slashing prices to compete with a record number of foreclosed homes coming onto the market. Barack Obama’s advisers say the president will use up to $100 billion in financial-rescue funds to ease the mortgage crisis.

“Builders are not only struggling to manage the inventory of new homes, which at the current sales pace would take more than 11 months to clear, but are also competing with the influx of foreclosed homes to the market, which is still rising,” said Julia Coronado, a senior U.S. economist at Barclays Capital Inc. in New York.

The report is due at 8:30 a.m. today in Washington. Estimates of the 69 economists surveyed range from 500,000 to 688,000.

Building permits are forecast to drop to a 600,000 pace for December, from 615,000 a month earlier, according to the survey median.

Also at 8:30 a.m., the Labor Department may report that first-time jobless claims climbed to 543,000 from 524,000 the previous week, according to the survey median.

Down Again

Residential starts will slump another 29 percent in 2009 after dropping an estimated 33 percent last year, according to a survey released Jan. 6 by the National Association of Realtors.

The National Association of Home Builders/Wells Fargo index of builder confidence slumped to a record low for January, the Washington-based association said yesterday.

U.S. foreclosure filings in December were 41 percent higher than a year earlier, pushing up the inventory of unsold homes, RealtyTrac Inc., a seller of default data, said this month.

Obama’s National Economic Council Director Lawrence Summers said last week the president intends to use between $50 billion and $100 billion of the remaining half of the $700 billion bank-bailout fund enacted last year to address the foreclosure crisis.

KB Home, the fourth-largest U.S. homebuilder that caters to first-time buyers, reported a $307.3 million net loss on Jan. 9 for the fourth quarter and said the housing market would remain difficult this year.

“The housing industry continues to confront unprecedented downward pressure,” Chief Executive Officer Jeffrey Mezger said in a conference call with analysts and investors. “These conditions persist nationally with no visible signs of lessening in the near term.”

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: January 22, 2009 00:01 EST