Starts on single-family homes, which make up the bulk of the US housing market, rose 7.0 percent. August housing starts were up 19.0 percent from a year ago as the housing market recovers from the price bubble collapse in 2006. Building permits — an indicator of potential residential construction growth — declined more than expected, to a rate of 918,000 after an upwardly revised July rate 954,000. They were up 11.0 percent from the August 2012 level. “The trend in single-family starts this year has been broadly flat, in sharp contrast to the big gains of 2012, and permits have leveled off, too,” said Ian Shepherdson of Pantheon Macroeconomics. “Some of this presumably reflects a slowing in demand in the wake of the spike in rates but we also think homebuilders are trying to hold down inventory to keep prices rising.” According to a homebuilder survey released Tuesday, confidence in the market for newly built, single-family homes held steady in September at the highest level in nearly eight years. The National Association of Home Builders composite index was unchanged at 58 in September, after four months of solid gains.
US Builders Boost Single-Family Home Construction
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Department of Commerce said that overall construction on new homes, which includes single-family residences and buildings with multiple units, rose 0.9% in August to a seasonally adjusted annual rate of 891,000. Click to Play Bernanke: No timetable for tapering Federal Reserve Chairman Ben Bernanke says there is no fixed calendar for when tapering may begin, depending on progress in the economy. Builders are being cautious, wrote Jim OSullivan, chief U.S. economist at High Frequency Economics, in a research note. The overall result disappointed economists polled by MarketWatch, who had expected an August starts rate of 921,000, compared with an originally estimated July starts rate of 896,000. On Wednesday, the government revised Julys starts rate to 883,000.
Ship construction activity continues to show signs of turnaround
But mortgage rates have risen more than a full percentage point since early May. Some economists say higher rates may be starting to slow the recovery’s momentum. In July, new-home sales plummeted to the lowest level in nine months. Mortgage rates could rise even further if the Federal Reserve decides later Wednesday to slow its $85 billion a month bond purchase program. Most economists expect the Fed will announce that it will reduce its purchases by $10 billion.
We also saw a jump in construction activity for Supramax vessels in April, which explains why Supramax orders fell around the same time. So even though the number of http://www.ihireconstruction.com ships on order alone would have shown that all is not well for Supramax vessels, Aprils jump may point to optimism among companies focused more on minor bulks, or intense competition due to smaller capital requirements. Construction activity for Capesize vessels remains most optimistic, as the number of existing orders is low and rates have been outperforming those of Panamax and Supramax lately. Plus, its important to note that construction of Capesize vessels takes longer because of their size. Investors should view stabilization as positive Stabilizing construction activity means managers are expecting rates to recover to adequate levels that can generate good returns for existing constructions soon. While higher construction activity could drive supply growth higher, it isnt so worrisome, as shipping companies just went through a huge bubble burst.Psychologically, managers arent going to rapid-fire new vessel orders like they did from 2006 to 2008. With good shipyards fully booked, according to shipping company CEOs, investors should view higher construction activity as a positive for firms such as DryShips Inc.