Tuesday August 18, 04:23 PM
US home construction sees surprise decline in July
By P. Parameswaran
WASHINGTON (AFP) - US home construction saw a surprise decline in July, snapping a two-month rise and pointing to a slow recovery of the moribund housing industry at the center of the global financial crisis.
Both construction starts on privately owned homes and building permits for such homes suffered a drop last month, the Commerce Department reported.
Housing starts fell at a seasonally adjusted annual rate of 1.0 percent to 581,000 from the revised June estimate of 587,000. Most analysts had expected 599,000 new starts in July.
Permits to construct privately-owned homes fell to 560,000 -- 1.8 percent below the revised June rate of 570,000 and below the forecast by analysts of 577,000.
The unexpected drop in housing starts and building permits came after rises chalked up in May and June from all-time lows reached in April following the collapse of the housing bubble.
The ensuing home mortgage meltdown triggered the global financial crisis that plunged the world's largest economy into recession in December 2007.
Housing starts in July were 37.7 percent below the year ago level while building permits were down 39.4 percent, the Commerce Department data showed.
Construction of single-family houses, which account for 75 percent of the industry, continued to stoke homebuilding recovery.
Single-family housing starts reached 490,000 in July -- 1.7 percent above the revised June figure of 482,000.
Permits to build such homes rose for the fourth month running, by 5.8 percent to 458,000 from the revised June figure of 433,000.
Permits for buildings with five units or more plunged 26.3 percent to 84,000 in July while starts on such buildings dropped 16.7 percent to 80,000.
Analysts said the latest housing data reinforced a growing perception that residential construction was at bottom and slowly gaining upward momentum.
"Homebuilding has been stable for the last seven months, albeit at a slow pace," said Celia Chen, a senior director of the Moody's Economy.com.
Total housing starts have been treading between 500,000 and 600,000 units since the beginning of the year, with the healthier single-family market gaining steadily over the same period, she said.
Single-family starts were now 37 percent above the bottom reached in January "although it still leaves the pace of construction very low," Chen added.
Analysts pointed out that the huge cutback in multi-family starts which fueled the decline in overall housing construction activity in July was not unexpected.
It is "a very volatile segment and double-digit changes, as occurred in July, are not surprising," said Joel Naroff, president of Naroff Economic Advisors.
"If we worry about the wild swings in this area, we will miss the key part of the report: single family activity is steadily rising," he said.
This portion of the market increased to the highest level since October 2008 and indeed has not dropped since December of last year, he noted.
Naroff also raised the prospect of housing adding to any growth in third quarter gross domestic product (GDP), a broad measure of the economy's activity, which fell at 1.0 percent in the second quarter and 6.4 percent in the January-March period.
Andrew Busch of BMO Capital Markets agreed.
"Given that singles continue to trend higher, and as homebuilder confidence grows, residential construction should start adding to growth," he said.
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