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Housing Takes Hit to 10-Month Low

Thursday, July 18, 2013

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U.S. housing production took an unanticipated nose dive in June to its lowest level since August 2012, due to a slowdown in the multi-family sector, according to new data from the Commerce Department.

Housing starts dropped 9.9 percent to a seasonally adjusted annual rate of 836,000, falling short of experts’ forecasts. Some economists had anticipated a near-960,000-unit rate for June, according to reports.

Home starts
Rishichhibber / Wikimedia Commons

Housing starts dropped 9.9 percent in June, from a revised May rate of 928,000 units.

Applications for building permits—a sign of future construction—fell 7.5 percent to 911,000. Economists expected a rise to 1 million.

Still, starts were up 10.4 percent above the June 2012 rate of 757,000, and the permit figure is up 16.1 percent above last year’s rate of 785,000 for the same month, the Commerce Department reported Wednesday (July 17).

Sectors Slow Down

The multifamily segment accounted for much of the decline in June, dropping 26.2 percent to a 245,000-unit rate. The sector’s future looks bleak as well, as permits for multi-family residences fell 21.4 percent to 287,000-unit rate.

"The large dip in multifamily production in June follows a boost of activity in May, and is consistent with the volatility that has come to characterize that sector as well as the uneven pace of the housing recovery," according to the National Association of Home Builders chief economist David Crowe.

Single-family home starts declined 0.8 percent to a 591,000-unit pace—the lowest since November 2012, the report shows. But permits for the largest segment of the market increased 0.6 percent to 624,000, the highest level seen since May 2008.

Single-family starts account for 70 percent of all construction activity.

Regionally, combined starts activity declined in June by 12.1 percent in the Northeast, 7.4 percent in the Midwest, 12 percent in the South, and 5.4 percent in the West.

Confidence Surges

The residential setback does not appear to be bothering home builders, however.

Builder confidence is in positive territory and has been for three consecutive months, the National Association of Home Builders announced Tuesday (July 16).

David Crowe

“The large dip in multifamily production in June follows a boost of activity in May, and is consistent with the volatility that has come to characterize that sector as well as the uneven pace of the housing recovery,” NAHB chief conomist David Crowe said in a statement.

NAHB said its housing index rose six points in July, to reach 57.

Economist Paul Diggle from Capital Economics tweeted that the NAHB has a “history of over-exuberance as a predicator of starts.”

Diggle told USA Today that "homebuilding is still very much in recovery mode."

NAHB’s news came with a warning that positive gains could be “disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the new housing finance system,” according to NAHB Chairman Rick Judson, a home builder from Charlotte, NC.


Tagged categories: Construction; Economy; Good Technical Practice; Government; Housing; Housing starts; National Association of Home Builders (NAHB); Residential Construction

Comment from Wayne Yancey, (7/18/2013, 11:42 AM)

Depends on your geographic location. Housing starts in the PNW are in the rise. Sites that have stood dormant for 5 years are active. Mind you, some sites in my area are as small as 6 lots. But the beat goes on.

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