U.S. housing starts fell to a 1.903 million-unit annual rate last month, a government report showed, as frigid temperatures and storms restrained building in some parts of the country. The January pace follows a December rate of 2.067 million, which was the fastest since February 1984, the Commerce Department said in Washington. The harsh weather slowed work by companies such as Hovnanian Enterprises Inc. Borrowing costs near historic lows helped push housing starts last year to their highest level since 1978, and economists said faster economic growth this year may sustain housing sales. The annual pace of housing starts last month still exceeds last year's total of 1.848 million.
``The weather was probably a factor because it was colder than normal last month,'' Michael Moran, chief economist at Daiwa Securities America Inc. in New York, said. Because starts of single-family houses soared late last year, ``it was logical to expect'' some slowing. Economists had expected starts to slip to 2 million homes at an annual pace from the previously reported 2.088 million rate in December, according to the median forecast in a Bloomberg News survey. Treasury securities continued to rise after the report. The note maturing in February 2013 gained 9/32 point, pushing the yield down 3 basis points to 4.00 percent. A basis point is 0.01 percentage point.
Single-Family Starts
Starts of single-family homes fell 8 percent in January to a 1.537 million-unit rate after a 1.670 million rate a month earlier. Starts of townhouses, apartments and other multifamily homes fell 7.8 percent to a 366,000 annual rate in January. Building permits, an indicator of future construction, fell 2.8 percent to 1.899 million units at an annual rate, after rising to 1.953 million the previous month. Starts fell in all regions: 21 percent in the Midwest to an annual rate of 319,000; 14 percent in the Northeast to 148,000; 5.2 percent in the South to 918,000; and 1 percent in the West to 518,000. January housing completions fell 2.3 percent to 1.709 million units at an annual rate from 1.749 million. The average 30-year fixed mortgage rate in January was 5.74 percent, down from 5.88 percent a month earlier, according to Freddie Mac, the No. 2 buyer of U.S mortgages. In June, the 30- year rate reached 5.21 percent, the lowest in at least 45 years, Freddie Mac said.
Mortgage Rates
``With mortgage rates stable in recent months, there is no reason to expect a further near-term drop in home sales,'' Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, said. ``A serious downturn in housing activity will have to wait until there is a meaningful increase in mortgage rates.'' Mortgages won't rise until the Federal Reserve raises borrowing costs, Shepherdson said. Fed Chairman Alan Greenspan said last week that ``prospects are good for sustained expansion of the U.S. economy.'' Low inflation will allow the central bank to remain ``patient'' before raising interest rates, Greenspan said in congressional testimony. The National Association of Home Builders projects 1.79 million housing units will be started this year, compared with 1.85 million last year. Order backlogs and an improving economy will limit the negative effect of any rise in interest rates. Housing starts may have slipped from December because of cold weather in the Northeast and Southeast, economists said.
Weather
The average temperature in the Northeast U.S. last month was 6.5 degrees Fahrenheit cooler than the average from 1895 to 2004, according to the National Climatic Date Center in Asheville, North Carolina. Temperatures in the Southeast were 1.8 degrees cooler than normal, the center said. Hovnanian Enterprises, the eighth-largest U.S. homebuilder by stock market value, said stormy weather last month made it more difficult for the Red Bank, New Jersey, company to start building some homes. U.S. homebuilder optimism slipped this month after snowstorms hindered construction and kept prospective buyers from reaching some sites, an industry survey showed. The National Association of Home Builders' housing market index registered 65 in February, the lowest since July, compared with 69 the month before. Readings higher than 50 mean more builders view conditions as good than poor. The index has exceeded 60 since June.
Mortgage Applications
An index of U.S. mortgage applications rose for the first time in four weeks, suggesting that prospective homebuyers may be returning to the market. The Mortgage Bankers Association's index climbed 4.9 percent to 837.1 from 797.8 the week before. The home purchase applications measure rose 2.9 percent to 413.9 from 402.2 and is close to the record reached in January. Residential construction accounts for 5 percent of the value of all goods and services produced in the U.S. Housing-related spending on such items as furniture and appliances also contribute to stimulating economic growth, economists said.
Appliance Shipments
Shipments of major home appliances in the U.S. rose 2.8 percent in January compared with a year ago, boosted by deliveries of microwave ovens and gas ranges, according to the Association of Home Appliance Manufacturers, a Washington-based trade group. Toll Brothers said earlier this month that revenue from homebuilding rose 6 percent during the company's fiscal first quarter, which ended Jan. 31, from a year earlier. The Huntingdon Valley, Pennsylvania, company also said order backlogs rose 56 percent to $2.9 billion during the quarter. ``The luxury new home market continues to be extremely strong,'' Robert Toll, chairman and chief executive of Toll Brothers, said in a statement.
Gross domestic product is forecast to increase 4.6 percent this year, the fastest since 1984, according to the median estimate of 61 economists surveyed by Bloomberg News this month. Mortgage rates generally move in line with long-term securities such as 10-year Treasuries. The yield on the 10-year note, which averaged about 3.99 percent last year, is forecast to rise to 4.40 percent by the second quarter, based on the median estimate of economists surveyed by Bloomberg News from Jan. 30 to Feb. 6. //www.bloomberg.com