The U.S. home construction tumbled in June, a surprising sign of weakness for a sector that has struggled to maintain momentum over the past year.
Housing starts sank 9.3% last month to a seasonally adjusted annual pace of 893,000, the weakest showing since September 2013, the Commerce Department said Thursday.
It was the second-straight monthly drop and was driven by a nearly 30% decline in the South, the largest monthly decrease on record for that part of the country. Other parts of the U.S., however, posted increases.
Though the report was a disappointment overall, there were a few silver linings. For the entire second quarter, construction of single-family homes was up 4% from a year ago, compared with a 2% yearly decline for the first three months of the year. Permits for single-family homes were up 2.6% from the prior month and housing starts were up 7.5% from a year earlier.
National builder Lennar Corp. said during its quarterly call with investors last month that a pickup in construction for single-family homes will depend on whether mortgage lenders relax their standards. But rival KB Home said during its quarterly call that it has seen encouraging signs, such as the return of first-time buyers in certain markets with strong job growth.
Home building surged in 2012 and the early part of last year, but was thrown off track by rising mortgage rates and increasing home prices. Construction nearly touched postrecession highs in April, but turned downward the following month.
Despite the report, several recent signs have pointed to the housing market regaining its footing. Sales of previously owned homes, the broadest measure of housing demand, rose in May to the highest level since October, and sales of newly built homes that month rose to the highest level in six years.
Both housing starts and permits were weaker in June than expected. Economists surveyed by The Wall Street Journal had projected starts would rise to a pace of 1.015 million in June, and expected permits would increase to a pace of 1.040 million.
The decline in construction was driven by a 9% drop in single-family homes and a nearly 10% drop in apartments and condominiums homes with at least two units.
Economists generally believe home building will pick up this year from the 930,000 units built last year and make a modest contribution to economic growth.
Source: Reuters
