March 17, 2009 / 9:01 AM / 11 years ago

Housing starts seen at record lows in February

WASHINGTON (Reuters) - The pace of U.S. housing starts probably slipped to yet another record low in February, after plunging nearly 40 percent during the past three months, according to a Reuters poll.

Row homes valued at $400,000 each, which are offered for free in a "buy one, get one free" deal, are seen in Escondido, June 3, 2008. REUTERS/Mike Blake

February housing starts are expected to slow to a seasonally adjusted annual rate of 450,000 units, based on a median forecast of 70 analysts. That would be a drop from January’s rate of 466,000, which was the lowest since the Commerce Department began keeping records in 1959.

“We’ve gotten to a point where there’s almost no speculative building anyway,” said Chris Low, chief economist for FTN Financial, in New York.

“So the starts that we see are homes that are going up either built by owner or built by a contractor with an owner already on the hook to pay for the home,” Low said. “So there is no need for any further decline unless the number of people buying new homes drops further.”

High rates of unsold home inventories and foreclosures have kept many U.S. home builders off the job, pushing the rate of groundbreaking for new homes to record lows.

“The silver lining is that home builders are finally facing reality. They should have cut production like this years ago. And if inventory is ever going to fall to a point where prices can stabilize, then overproduction had to stop,” Low said.

Permits for future groundbreaking, which give a clue to construction plans, also are projected at a record low unit rate of 500,000 in February, down from January’s pace of 531,000, which also was the lowest on record.

Tight credit standards have made it more difficult for potential buyers to get financing. And builders have cut activity sharply in an effort to whittle down a big glut of unsold homes.

The Commerce Department will release the data at 8:30 a.m.(1230 GMT) on Tuesday.

The following is a selection of comments from economists:

BARCLAYS CAPITAL

Forecast: Starts — 450,000 units

We expect starts to fall 3.5 percent to 450,000 in February, a slower pace of decline. Builders are responding to the growing imbalance in the housing market: months’ supply of new homes has climbed to 13.3 months despite builders’ efforts to reduce inventory.

BMO CAPITAL

Forecast: Starts — 450,000 units

The decline in housing starts probably continued in February, but at a slower pace than the double-digit declines of the previous three months. Building permits are likely to fall sharply in February after holding up relatively well in January. While starts and permits are already at record lows, a significant inventory overhang of homes remains, which will likely keep a lid on construction though 2009.

WACHOVIA

Forecast: Starts — 480,000 units

With an unusually cold February especially in the south, housing starts will remain depressed. Starts may see an uptick, but levels will remain near historic low levels. Permits should also continue to remain at low levels, but the pace should stay well above starts, signaling a bottom in construction activity may be closer than many expect. However, once we reach a bottom, the recovery may be extremely weak and agonizingly slow.

(Polling by Bangalore Polling Unit)

Reporting by Nancy Waitz; Editing by Jan Paschal

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