Ahead of the Bell: Housing Starts

US builders likely started work on more homes in March, a sign momentum growing in housing

Associated Press

WASHINGTON (AP) -- U.S. builders likely began work on more homes in March, a trend that would signal further strengthening of the housing recovery at the start of the spring-buying season.

Economists forecast that builders broke ground on homes at a seasonally adjusted rate of 930,000, according to a survey by FactSet. That would be up from 917,000 in February and the second-fastest pace since June 2008.

The Commerce Department will release the report at 8:30 a.m. EDT Tuesday.

Expectations are high after applications for building permits rose in February to the highest level in 4½ years. Building permits are a sign of future construction. Economists cautioned that construction in March may have been slowed by colder-than-normal weather.

The housing recovery that began a year ago appears to be gaining momentum. Steady job growth, near record-low mortgage rates and rising home values have encouraged more people to buy. In response to higher demand and a low supply of available homes for sale, builders have stepped up construction.

February's pace of homes started was nearly 28 percent higher than the same month in 2012. And much of the strength has come from single-family home construction, which represents two-thirds of the market.

Single-family housing starts increased to an annual rate of 618,000 in February. That's the fastest pace in 4½ years and 31 percent higher than the same month last year.

Still, the sudden rise in home construction follows a severe and prolonged downturn. And the effects of the crisis threaten to slow the recovery's momentum.

The National Association of Home Builders/Wells Fargo April survey released Monday showed U.S. homebuilders are concerned that limited land and rising costs for building materials and labor will slow sales in the short term. That led to a third straight drop in confidence.

Still, their outlook for sales over the next six months climbed to the highest level in more than six years — suggesting the obstacles could be temporary.

And construction firms have stepped up hiring in recent months. They added 18,000 net jobs in March and 169,000 since September, according to the Labor Department.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the homebuilders.

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