In the latest indication that the housing market remains in a correction phase, housing starts rose 2.3 percent in June to a seasonally adjusted annual rate of 1.467 million following downward revisions for the previous two months, the Commerce Department reported. Building permits, which generally are a harbinger of future building activity, were down sharply last month for both single-family and multifamily construction.
“Today’s housing report is consistent with what builders have been telling us in our own surveys. They are dealing with challenging market realities by cutting back on new construction activity and by working down their inventories in the face of weak consumer demand by trimming prices and offering other types of incentives to boost sales and limit cancellations,” said Brian Catalde, president of the National Association of Home Builders (NAHB) and a home builder from El Segundo, Calif.
“The small overall increase in total housing starts does not signal the end of the housing downswing,” said NAHB Chief Economist David Seiders. “All of the gain occurred on the multifamily side, which is subject to sizeable month-to-month volatility, and single-family starts actually registered a slight decline following downward revisions to both April and May. Looking toward future single-family production, permit authorizations fell to their lowest level since December of 1996 and now stand 43 percent below the recent peak in the fall of 2005.
“In view of current market challenges, we expect to see further erosion in housing starts during the second half of this year. However, we expect to see signs of stabilization by the end of this year and we’re projecting a gradual recovery process in 2008.”
Starts of new single-family homes slipped by 0.2 percent during June to a seasonally adjusted annual rate of 1.151 million units, 21.6 percent below a year earlier.
Multifamily housing starts, on the other hand, increased 12.5 percent during the month to a seasonally adjusted annual rate of 316,000, which was 9.7 percent below the rate of June 2006.
Total building permits fell 7.5 percent in June to a seasonally adjusted annual pace of 1.406 million units and were down 25.2 percent from a year earlier.
Single-family permit issuance last month fell 4.1 percent to 1.019 million units, 27.5 percent below a year earlier, while multifamily permits declined 15.3 percent to 387,000 units, which was 18.4 percent below the annual rate set in June 2006.
Regionally, starts of new homes and apartments in June were up 9 percent in the West and 2.4 percent in the South, following sharp declines in May. Starts were down 3.7 percent in the Midwest and 2.4 percent in the Northeast. All four regions experienced a construction pace that was down substantially from a year earlier.