WRAPUP 4-Bad weather depresses U.S. housing starts in Feb

* Bad weather pushes down new home construction

* Building permits fall for second straight month

* Import prices fall for the first time since July
(Adds rate decision, Obama officials comments on economy)

By Lucia Mutikani

WASHINGTON, March 16 (BestGrowthStock) – U.S. housing starts fell
last month as winter storms disrupted construction, and another
drop in building permits suggested the weakness would linger.

Though the data on Tuesday was an indication home building
would clip economic growth in the first quarter, it was not as
weak as analysts had expected, and groundbreaking for housing
in January was revised significantly higher.

The Federal Reserve left benchmark interest rates unchanged
near zero and renewed its pledge to hold them “exceptionally
low” for an “extended period,” even as it acknowledged economic
activity continued to strengthen.

Fed officials also noted that housing starts have been flat
at “a depressed level.” See: [ID:nN16251615]

“The numbers suggest we are going to lose the support of
homebuilding at least temporarily, probably this quarter or
next. That will limit some of the improvement in GDP and final
sales in particular,” said Aaron Smith, a senior economist at
Moody’s Economy.com in West Chester, Pennsylvania.

Groundbreaking activity fell 5.9 percent to a seasonally
adjusted annual rate of 575,000 units, reversing the prior
month’s gain, the Commerce Department said. Markets had
expected housing starts to fall to 570,000 units.

New building permits, which give a sense of future home
construction, fell 1.6 percent to a 612,000-unit pace last
month, dropping for a second straight month. That compared to
analysts’ forecasts for 610,000 units.

Investment in new home construction made a small
contribution to fourth quarter gross domestic product.

U.S. stocks (Read more about the stock market today. ) were little moved on the data, rising after
Standard & Poor’s affirmed its ratings on Greece and ended its
review for a downgrade. They extended gains after the U.S.
central bank vowed to hold benchmark lending rates
exceptionally low.

Prices for U.S. government debt extended gains on the Fed’s
low rates commitment, while the dollar fell against the euro.

Actions varying from enactment of a government tax credit
for first-time buyers, purchases of mortgage-backed securities
by the Fed and private loan modifications have supported home
sales and slowed the decline in prices.

In a statement to the U.S. House of Representatives
Appropriations Committee, Obama administration officials said
while the economy was far from healthy, its trajectory had
changed from “uncontrolled freefall to approximate stability.”


Even without the weather-related disruptions, the housing
market’s recovery from a three-year slump is showing signs of
hesitation. Home-builder sentiment slipped this month on
worries over lack of credit for new projects and a wave of
distressed properties hitting the market.

Such properties typically sell below value and could crowd
out the market for new homes.

“The problem is that the market is saturated with excess
supply. Some of this excess may be reduced by a surge in sales
ahead of the end of the tax credit, but the bulk is going to
take a very long time to work off,” said Paul Dales, a U.S.
economist at Capital Economics in Toronto.

The government revised January’s housing starts upward to
611,000 units from the previously reported 591,000. Compared to
February last year, starts were up 0.2 percent.

Groundbreaking for single-family homes fell 0.6 percent
last month to an annual rate of 499,000 units in January.
Starts for the volatile multifamily segment fell 30.3 percent
to a 76,000-unit annual pace.

With home sales weakening in recent months, new home
construction is no longer running below sales, a factor that
had helped to lower the supply of homes on the market over the
last two years.

Analysts said this will put downward pressure on new home
construction. Still, they said an improvement in the labor
market and the broader economic picture will prevent another
collapse in housing. A rush to take advantage of the extended
and expanded tax-credit could bump up sales.

Prospective buyers have to sign contracts before April and
close them by June to benefit from the tax rebate.

“Our view is that much of the benefit from the tax rebate
has been realized,” said Moody’s Economy.com’s Smith.

There are also concerns that the winding up of purchases of
mortgage-backed securities by the Fed at the end of this month
could push up home loan rates.

Separately, import prices fell 0.3 percent in February as
the cost of crude oil and other petroleum products tumbled, the
Labor Department said. It was the first monthly decline since
July and pointed to benign inflation pressures.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Housing starts, permits graphic:http://link.reuters.com/few93j
U.S. import prices graphic: http://link.reuters.com/zaw93j

Stock Basics

(Additional reporting by Doug Palmer; Editing by Andrew Hay
and Padraic Cassidy)

WRAPUP 4-Bad weather depresses U.S. housing starts in Feb