New House Construction Falls 9.9 Percent– Lowest Level in Year

Written by: John Landers

The housing industry took a breather in June as new house construction in the US decreased to its lowest level in nearly a year, based on Commerce Department  data.  Builders  broke ground  for 836,000 homes on an annualized basis—the few number of starts since August 2012. The rate is 9.9 percent lower than the revised 928,000 figure for May.

A significant decrease in multifamily construction projects accounted for most of the decline. In addition, the availability of suitable vacant land also presents a challenge for builders.  The multifamily segment of the residential housing component has a tendency to be more volatile than the single-family home segment.

Short-term blip in recovery?

The volume of building permits fell 7.5 percent to an annualized rate of 911,000. The consensus figure was 1 million units. Although housing starts are down, the level of approved permits is higher. Combined with low interest rates for home mortgages and an improved labor market, it’s possible to see more ground-breaking for foundations and a rebound in starts in July.

Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC (Philadelphia) and a respondent to the Bloomberg survey, forecast 915,000 housing starts—the lowest estimate in a range of received… “As construction ramps up, we’re bound to have some hiccups along the way,” said Lebas.

He does not see a loss of momentum in the recovery based on this “data point.  According to Lebas, “The housing markets are going to be a driver of economic growth.”

Housing starts construction statistics

Builders broke ground for 591,000 homes in June—0.8 percent decline from the 596,000 start in May. This represents the fewest starts since November 2012. The multifamily category experiences a 26.2 percent decline—an annualized rate of 245,000 units and the lowest number recorded since August 2012.

Each of the four regions reported decreases in new house construction in June. The Northeast and South reported the largest drop in starts at 12.1 percent and 12 percent, respectively. The unexpected decline across the country may have been affected by the 13th wettest month on record for the contiguous U.S. Eighteen states along the East Coast and in the Ohio Valley experience record precipitation.

Builders’ confidence increased

Even in the midst of a decrease  in housing starts, builders gained more confidence, according to the National Association of Home Builders/Wells Fargo sentiment index. The sentiment indicator rose to 57 in July. It’s the highest level in seven years. June’s confidence index was revised to 51.

Over the last two months, the index has gained 13 points–achieving the biggest back-to-back increases for  since January-February 1992.

Roger A. Cregg, the CEO of Florida and Arizona homebuilder AV Homes said in a conference call that his company was experiencing “increased demand driven by recovery in the household formation, employment, and record affordability.” Clegg describes the home buying activity in the single-family homes segment of the market as “robust.”


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New House Construction Falls 9.9 Percent–...

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