Ahead of the Bell: Housing Starts
WASHINGTON --A measurement of new-home construction in May is forecast to decline as developers pulled back from a market overflowing with unsold homes.
The Commerce Department's report, due out at 8:30 a.m. EDT Tuesday, is expected to show that construction of new homes and apartments in May fell to a seasonally adjusted annual rate of 1.475 million units, down from 1.528 million units in April, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR.
If the results meet the forecast, housing construction will be more than 24 percent below last year's levels.
Meanwhile, builders' requests for new construction permits -- also included in the Commerce Department report -- are forecast to rise 4 percent to 1.486 million. A month earlier, construction permits fell nearly 9 percent from March to hit 1.429 million in April.
On Monday, a housing industry trade group reported that an index of the housing market's health fell in June for the fourth straight month, to a 16-year low.
The National Association of Home Builders' housing market index, which tracks builders' perceptions of current market conditions and sales expectations for new homes over the next six months, fell to the lowest reading since February 1991.
Housing developers are being squeezed by tighter lending standards for borrowers trying to get mortgage loans. In response to weak demand, developers are cutting prices and offering incentives to cope with a mounting supply of unsold homes.
The continuing slump is bad news for housing developers like Lennar Corp., D.R. Horton Inc., Pulte Homes Inc., Centex Corp. and Toll Brothers Inc., the largest U.S. homebuilders by market value.
Sales of new homes, which represent about 15 percent of all home sales, surged in April, but median prices fell 11 percent from the previous month as builders slashed prices.
Mortgage giant Freddie Mac reported last Thursday that 30-year, fixed-rate mortgages averaged 6.74 percent, the highest level in 11 months.
