Not only is it too early to get excited, this is worse than bad. This is a result of the government's desire to get banks to lend.
So the banks lent to the most logical party: builders. If the builder defaults, the bank gets the building. But the bank doesn't really want the building because there is already two years worth of inventory.
Once the builders default, now who will the banks lend to?
Bloomberg News, sent from my iPhone.
U.S. Economy: Housing Starts Unexpectedly Jumped
March 17 (Bloomberg) -- U.S. housing starts in February unexpectedly snapped the longest streak of declines in 18 years, raising optimism the market may be finally finding a floor.
Work began on 583,000 homes at an annual rate, a 22 percent increase from January that was propelled by a surge in condominiums, apartments and townhouses, Commerce Department figures in Washington showed today. A separate report showed gains in producer prices slowed, underscoring a lack of inflationary pressures with the economy in a recession.
“It’s a bit too early to get too excited, but we are nearing the bottom in housing,” said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis, who had forecast an increase in starts.
The lifting gloom pushed up builder shares, led by gains at Toll Brothers Inc., the nation’s largest developer of luxury homes, and Pulte Homes Inc., the largest homebuilder. The Standard & Poor’s 500 Supercomposite Homebuilding Index advanced 6.4 percent to close at 188.92 in New York.
Building permits, a sign of future construction, rose less than starts, indicating construction may again slow. Developers are still contending with record foreclosures that depress prices and profits, and put pressure on the Federal Reserve, which meets today and tomorrow, and the Obama administration to solve the credit crisis.
Starts were projected to fall to a 450,000 annual pace, according to the median forecast of 71 economists surveyed by Bloomberg News. Estimates ranged from 400,000 to 500,000. January’s starts were revised up to 477,000 from a previously estimated 466,000.
More Permits
Permits increased 3 percent to a 547,000 annual pace. They were forecast to drop to a 500,000 annual rate, according to the survey median.
“You get the sense from a lot of the data coming out now that we’re beginning to get to a bottom,” Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, said in an interview with Bloomberg Television. “We’re not quite there yet.”
The Labor Department reported wholesale prices rose 0.1 percent in February as the cost of energy products, cigarettes, light trucks and household appliances increased.
The increase was less than forecast and followed a 0.8 percent advance in January. Excluding food and fuel, so-called core prices rose 0.2 percent.
Compared with February 2008, producer prices were down 1.3 percent.
Slack, Prices
“There’s just a huge amount of slack now in the U.S. economy and the global economy” that’s keeping prices down, said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “That’s going to hang around for some time.”
Economists predict Labor will report tomorrow that consumer prices increased 0.3 percent in February for a second month. January’s gain was the first in six months. Excluding food and energy costs, consumer prices rose 0.1 percent, according to a Bloomberg survey.
Fed Chairman Ben S. Bernanke said last week that the central bank is “not anticipating deflation,” or a prolonged drop in prices that hurts profits and makes it difficult to repay loans.
Bernanke on Inflation
“We are committed to price stability, we believe we have the tools in place to do that,” Bernanke said March 10 in response to a question after a speech to the Council on Foreign Relations in Washington. “Right now both the objectives for price stability and the objectives for growth are pointing in the same direction and that is for strong support of the economy.”
Fed policy makers will keep the benchmark interest rate near zero following their two-day meeting tomorrow and discuss additional measures to calm the credit crisis, economists said.
Bernanke and his colleagues are examining whether to expand existing asset-purchase and lending programs or initiate fresh measures, such as buying Treasuries. The central bank also is purchasing Fannie Mae, Freddie Mac and Federal Home Loan Bank debt under a program aimed to reduce mortgage costs.
The Commerce report showed construction of single-family homes climbed 1.1 percent to a 357,000 rate. Work on multifamily homes, such as townhouses and apartment buildings, surged 82 percent to a 226,000 pace from 124,000 in January.
Northeast Surges
The increase in starts was led by an 89 percent jump in the Northeast.
Banks need to “go the extra mile” and keep credit flowing to businesses to prevent the economy from worsening, Treasury Secretary Timothy Geithner said in remarks at the White House yesterday. The economy has lost 4.4 million jobs since the recession began in December 2007.
President Barack Obama has pledged a $275 billion rescue to help keep as many as 9 million borrowers in their homes and trim foreclosures. His efforts also include a tax break of up to $8,000 for first-time homebuyers that wouldn’t require repayment.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
Find out more about Bloomberg for iPhone: http://bbiphone.bloomberg.com/iphone
U.S. Economy: Housing Starts Unexpectedly Jumped
March 17 (Bloomberg) -- U.S. housing starts in February unexpectedly snapped the longest streak of declines in 18 years, raising optimism the market may be finally finding a floor.
Work began on 583,000 homes at an annual rate, a 22 percent increase from January that was propelled by a surge in condominiums, apartments and townhouses, Commerce Department figures in Washington showed today. A separate report showed gains in producer prices slowed, underscoring a lack of inflationary pressures with the economy in a recession.
“It’s a bit too early to get too excited, but we are nearing the bottom in housing,” said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis, who had forecast an increase in starts.
The lifting gloom pushed up builder shares, led by gains at Toll Brothers Inc., the nation’s largest developer of luxury homes, and Pulte Homes Inc., the largest homebuilder. The Standard & Poor’s 500 Supercomposite Homebuilding Index advanced 6.4 percent to close at 188.92 in New York.
Building permits, a sign of future construction, rose less than starts, indicating construction may again slow. Developers are still contending with record foreclosures that depress prices and profits, and put pressure on the Federal Reserve, which meets today and tomorrow, and the Obama administration to solve the credit crisis.
Starts were projected to fall to a 450,000 annual pace, according to the median forecast of 71 economists surveyed by Bloomberg News. Estimates ranged from 400,000 to 500,000. January’s starts were revised up to 477,000 from a previously estimated 466,000.
More Permits
Permits increased 3 percent to a 547,000 annual pace. They were forecast to drop to a 500,000 annual rate, according to the survey median.
“You get the sense from a lot of the data coming out now that we’re beginning to get to a bottom,” Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, said in an interview with Bloomberg Television. “We’re not quite there yet.”
The Labor Department reported wholesale prices rose 0.1 percent in February as the cost of energy products, cigarettes, light trucks and household appliances increased.
The increase was less than forecast and followed a 0.8 percent advance in January. Excluding food and fuel, so-called core prices rose 0.2 percent.
Compared with February 2008, producer prices were down 1.3 percent.
Slack, Prices
“There’s just a huge amount of slack now in the U.S. economy and the global economy” that’s keeping prices down, said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “That’s going to hang around for some time.”
Economists predict Labor will report tomorrow that consumer prices increased 0.3 percent in February for a second month. January’s gain was the first in six months. Excluding food and energy costs, consumer prices rose 0.1 percent, according to a Bloomberg survey.
Fed Chairman Ben S. Bernanke said last week that the central bank is “not anticipating deflation,” or a prolonged drop in prices that hurts profits and makes it difficult to repay loans.
Bernanke on Inflation
“We are committed to price stability, we believe we have the tools in place to do that,” Bernanke said March 10 in response to a question after a speech to the Council on Foreign Relations in Washington. “Right now both the objectives for price stability and the objectives for growth are pointing in the same direction and that is for strong support of the economy.”
Fed policy makers will keep the benchmark interest rate near zero following their two-day meeting tomorrow and discuss additional measures to calm the credit crisis, economists said.
Bernanke and his colleagues are examining whether to expand existing asset-purchase and lending programs or initiate fresh measures, such as buying Treasuries. The central bank also is purchasing Fannie Mae, Freddie Mac and Federal Home Loan Bank debt under a program aimed to reduce mortgage costs.
The Commerce report showed construction of single-family homes climbed 1.1 percent to a 357,000 rate. Work on multifamily homes, such as townhouses and apartment buildings, surged 82 percent to a 226,000 pace from 124,000 in January.
Northeast Surges
The increase in starts was led by an 89 percent jump in the Northeast.
Banks need to “go the extra mile” and keep credit flowing to businesses to prevent the economy from worsening, Treasury Secretary Timothy Geithner said in remarks at the White House yesterday. The economy has lost 4.4 million jobs since the recession began in December 2007.
President Barack Obama has pledged a $275 billion rescue to help keep as many as 9 million borrowers in their homes and trim foreclosures. His efforts also include a tax break of up to $8,000 for first-time homebuyers that wouldn’t require repayment.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
Find out more about Bloomberg for iPhone: http://bbiphone.bloomberg.com/iphone
Sent from my iPhone
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