WASHINGTON The rate of groundbreaking for new homes is expected to rise in April but will be tempered by a glut of unsold homes that will probably keep many U.S. home builders off the job, according to a Reuters poll.
Housing starts in April are expected at an annual rate of 520,000 units, up from 510,000 in March, based on a median forecast of 74 analysts.
"Although starts may have found a bottom, a strong rebound in construction is unlikely," Moody's Economy.com wrote in its weekly outlook. "The glut of homes is so large that a typical early-cycle rebound in homebuilding looks far out of reach."
Economists expect the pace of homebuilding to remain slow until the huge backlog of unsold homes is worked off.
"We suspect that this sluggish pace of homebuilding will be sustained for the foreseeable future, which should help to absorb much of the excess inventory of unsold new homes by mid-to-late 2009," Morgan Stanley and Co. Inc. wrote.
Permits for future groundbreaking, which give a clue to construction plans, are seen at a 530,000 unit rate in April, up from 516,000 units in March, based on a median forecast of 50 analysts.
The data will be released by the Commerce Department at 8:30 a.m. (1230 GMT) on Tuesday.
The following is a selection of comments from economists:
Forecast: Starts: 500,000 units
"A recovery in home sales and a bottom in starts would be a major first step in curbing the drag from housing. However, we do not foresee a return to a normal housing market for some time. The huge overhang of inventory, much of which is distressed properties, must be cleared. This will keep downward pressure on home prices."
IHS GLOBAL INSIGHT
Forecast: Starts: 510,000 units
Permits: 530,000 units
"The housing market is showing signs of stabilizing. Single-family housing starts have not budged in two months. New home sales are up from January's all-time low. We are not ready to call the bottom yet, however. The economy is still shedding jobs at a frightening pace, and credit remains tight. For April, we project that housing starts were unchanged, with a small drop in single-family starts offset by an increase in multi-unit starts. Permits will improve on an increase in multi-unit permits."
J.P. MORGAN CHASE BANK
Forecast: Starts: 520,000 units
Permits: 500,000 units
"The fact that single-family housing starts have recently been stable is an important development, because it means that the drag on GDP from falling residential investment will begin to fade. But with the months' supply of new homes very high, it will naturally be some time before starts can begin to increase again."
Forecast: Starts: 490,000 units
"It is still too premature to call an absolute trough. Starts may hover near the half-million unit pace during the first half of this year, but should begin to slowly climb during the second half. We are probably two years away from seeing starts back above one million units, however, as we continue to struggle with excess inventory and a deep recession."
(Polling by Bangalore Polling Unit)
(Reporting by Nancy Waitz, Editing by Walker Simon)