Homebuilding takes a breather, wholesale prices up

Wed Feb 20, 2013 2:28pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. builders broke ground on fewer homes last month but a jump in permits for future construction to a 4-1/2-year high indicated the housing market recovery remains on track.

Another report on Wednesday showed wholesale prices rose for the first time in four months in January. However, the gain was smaller than expected and left scope for the Federal Reserve to keep buying bonds to stimulate the economy.

Housing starts dropped 8.5 percent in January to an 890,000-unit annual rate, pulled down by a sharp drop in the volatile multi-family unit category, the Commerce Department said.

But starts for single-family homes hit their highest since July 2008 and permits for future construction, which lead starts by at least a month, were at their highest since June of that year.

The drop in starts followed an outsized gain in December and was confined to the Northeast and Midwest, suggesting winter weather likely contributed to the pullback.

"The fundamentals are there and the drivers are looking good," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. "We see more new construction this year. The only question is whether it will be in the multi-family or single-family segment."

Housing has shifted from being a headwind for the economy to being a pillar of support, although mortgage rates have crept higher in recent weeks, cooling loan demand.

Luxury homebuilder Toll Brothers on Wednesday reported disappointing quarterly results, hurt in part by lower selling prices, but other homebuilders have been able to take advantage of the recovering market.   Continued...

A vacant and blighted house sits next to a well-kept occupied house in a once thriving eastside neighborhood in Detroit, Michigan January 23, 2013. REUTERS/Rebecca Cook