Finance & Business World

U.S. builders probably broke ground on fewer homes in March after an unexpected jump the month earlier as they sought to reduce inventories, economists said before a report today.

Housing starts dropped 7.4 percent to an annual rate of 540,000, according to the median forecast of 72 economists in a Bloomberg News survey. A separate report from the Federal Reserve Bank of Philadelphia may show manufacturing is shrinking in the region at a slower pace this month, economists said.

A glut of unsold properties is pulling home prices down across the U.S., prompting builders to scale back projects. President Barack Obama’s administration has pledged measures to limit foreclosures and the Fed is buying back securities to drive down mortgage rates and spur demand.

“Market fundamentals do not support a near-term recovery,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “While spring has brought some positive signs on the housing front, a rebound is not in the foreseeable future.”

The Commerce Department’s housing report is due at 8:30 a.m. in Washington. Estimates in the survey ranged from 500,000 to 608,000, following a 22 percent gain in February to a 583,000 pace as condo construction almost doubled.

Building permits, a sign of future construction, likely fell 2.7 percent to a 549,000 annual pace, according to the median forecast.

Manufacturing Woes

Home starts have plunged from a peak rate of 2.27 million in January 2006, which capped the biggest housing boom in six decades. Falling construction has weighed on economic growth and plunging prices helped ignite the global credit crisis that led to what may become the worst recession in seven decades.

Manufacturing is another of the hardest-hit parts of the economy, even as the factory industry’s contraction shows signs of slowing. The Philadelphia Fed’s index may rise to minus 32 this month from minus 35 in March, economists said before the 10 a fast cash savings account.m. release. Readings less than zero indicate contraction.

In a sign the housing slump may be nearing a bottom, the National Association of Home Builders/Wells Fargo’s confidence index rose this month to the highest level since October, the group said yesterday. Confidence rose to 14 from 9, as record- low mortgage rates and falling prices started to stir demand. Readings below 50 mean respondents view conditions as poor.

Sales of both new and existing home rose in February. Still, rising unemployment continues to stifle demand as Americans shy away from big-ticket purchases. Job losses have totaled 5.1 million since the downturn began in December 2007, and economists surveyed by Bloomberg predict the jobless rate will reach 9.5 percent by the end of the year.

Jobless Claims

A report from the Labor Department at 8:30 a.m. may show initial jobless claims last week rose to 660,000 while the number of people receiving benefits the prior week rose to a record 5.89 million, according to economists’ forecasts.

With job losses mounting, foreclosure filings rose 30 percent in February from a year earlier, RealtyTrac Inc., a seller of default data, reported. Property values may fall further as foreclosures put even more homes back on the market. Home prices in 20 U.S. cities tracked by the S&P/Case-Shiller index have dropped 29 percent since their peak in July 2006.

Southern California house and condominium sales climbed 52 percent in March from a year earlier as buyers took advantage of prices 35 percent lower than the same period in 2008, MDA DataQuick, a San Diego-based research company, said yesterday.

Homebuilders, having to compete with cheaper resale prices, continue to feel the pinch. Lennar Corp., the fourth-largest in the U.S., reported a wider first-quarter loss than a year earlier and falling orders.

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