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Housing Starts Rise 3.9% in November

"The steady but low level of the HMI reflects the fact that builders and consumers have yet to see consistent signs that the economy is improving," noted NAHB Chief Economist David Crowe. "The good news is that the index and its subcomponents remain above recent lows from the early fall. NAHB expects an improving job market this spring will help prospective buyers feel more confident and propel more sales activity in 2011. However, the continued problems that builders are facing in obtaining construction credit and accurate appraisal values could significantly slow the onset of a housing recovery."

Stocks in the homebuilder sector were mostly higher Thursday following the report on housing starts and building permits. The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the sector, was 1.2% higher inearly-afternoon trading, while the iShares Dow Jones US Home Construction (ITB) ETF rose 1.4%.

Among individual builders, D.R. Horton (DHI) gained 1.9%, KB Home (KBH) 2%, PulteGroup (PHM) 1.9% and Lennar (LEN) 0.2%.

Hesitancy among potential home buyers had been a key driver of builders' low sentiment in recent months as uncertain consumers did not yet feel secure enough with the jobs market and overall economy to make such large purchasing decisions.

Near-record-low mortgage rates failed to spark robust demand for housing in recent months.

The U.S. housing market continues to struggle and has been under tremendous pressure for some time. Demand fell further after the expiration of federal tax credits for homebuyers earlier this year.

Some potential homebuyers have decided to go ahead and sign contracts, hoping to lock in still-low rates. Homebuilder Toll Brothers, which surprised investors with a return to year-over-year profitability in its fiscal fourth quarter , recently said deposits jumped 10% in the second half of November compared with year-earlier results.

While any mortgage demand can be viewed in a positive light, the still-struggling housing market continues to be plagued by sluggish demand, in part because of the tight credit market and inability of many potential buyers to access the credit they need to finance a mortgage.

Many Americans suffer from negative equity, where the amount they owe on their home is higher than the value of it, making them unqualified for refinancing.

Still-depressed home prices do not seem to make it any easier. The S&P/Case-Shiller 20-city index of national home prices rose slightly in September but home prices across the U.S. fell 2% in the third quarter after rising 4.7% in the second quarter.

-- Written by Miriam Marcus Reimer in New York.



>To contact the writer of this article, click here: Miriam Reimer.

>To follow the writer on Twitter, go to http://twitter.com/miriamsmarket.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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