New construction of U.S. homes and permits for future building likely rose in September, supported by an improvement in sales and declining stocks of unsold properties, according to a Reuters survey.
The poll of 69 economists forecast housing starts rising to a seasonally adjusted annual rate of 610,000 units in September from 598,000 units in August. New building permits, which give a sense of future home construction, were seen rising to an annual pace of 600,000 units from 580,000.
The Commerce Department will release the report on new residential construction on Tuesday at 8:30 a.m. (1230 GMT).
New home sales have improved in recent months and new home inventories are likely to fall to a 27-year low in September, said Chris Low, chief economist at FTN Financial in New York.
But there are still about twice as many existing homes on the market as there were the last time sales were this weak, suggesting it is still a very difficult environment for homebuilders.
The housing market, at the heart of the worst U.S. economic recession since the 1930s, is showing gradual signs of pulling out a slump that started in 2006.
However, there are worries that the recovery could falter when an $8,000 government tax credit for first-time home buyers ends next month. In addition, an expected rise in foreclosed properties could also hamper the recovery, analysts said.
Still, new home construction probably contributed to economic growth in the third quarter. The economy is expected to have started growing in the July-September quarter after a recession that started at the end of 2007.
We forecast residential investment will add to growth in the third quarter, the first positive contribution since the fourth quarter of 2005, and contribute an average of 0.8 percentage points to quarterly growth next year, said Michelle Meyer, an economist at Barclays Capital in New York.
As for home prices, we believe the freefall has decidedly ended but that it is too early to call the bottom. Moreover, foreclosures are likely to flow into the market at an accelerating pace, weighing on prices.
(Reporting by Lucia Mutikani; Editing by James Dalgleish)