June’s building permits also higher, up 2.5% to 624,000 annual rate
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — U.S. home builders sharply increased construction in June, according to estimates released Tuesday by the Commerce Department.
Housing starts rose 14.6% to a seasonally adjusted annual rate of 629,000, the highest level since January, the data showed.
Details underlying the June figures were also strong. There was a large increase in starts of multifamily units and a smaller gain in starts of single-family homes, the department reported.
Analysts said this will be the new trend in home building as there are more renters than buyers in the market.
The report was much better than expected. Economists surveyed by MarketWatch had been looking for a 3.6% increase to 580,000. May’s starts were revised lower to a 549,000 rate from 560,000 previously estimated, however.
Economists at Capital Economics in Toronto had forecast a big jump in June starts, saying that unusually severe weather had prevented builders from breaking new ground.
In addition, reconstruction from deadly tornadoes and floods was going to get underway, they said.
Economists don’t think the June gain is the start of a home-building surge and said the increase might have minimal economic impact.
Housing starts in a range of 1 million to 1.5 million units would be considered a healthy market.
High inventories of vacant existing homes continue to weigh down the market, economists said.
Given all the monthly volatility and revisions, starts have been fairly constant this year.
In the second quarter, starts averaged 576,000 compared with 582,000 in the first three months of the year.
This is close to the 587,000 starts in all of 2010, the second lowest reading on record.
Starts of single-family homes rose 9.4% to a 453,000 rate, while starts of multifamily units surged 31.8% to 170,000.
In the past year, starts are up 16.7%. Starts of single-family homes are up 0.4%, while starts of apartments and condos have jumped 104.8%.
Meanwhile, building permits rose 2.5% to a seasonally adjusted annual rate of 624,000 in June.
Permits for single-family homes rose 0.2% to a 407,000 rate. Many economists consider single-family permits to be the most important number in the government’s release.
Permits for apartments and condos increased 8.2% to 198,000.
The number of homes under construction rose 1% to a 419,000 annual rate, while the number of units completed in June fell 1.7% to an annual rate of 535,000.
On Monday, the National Association of Home Builders reported that the NAHB/Wells Fargo Housing Market Index, tracking builders’ level of confidence in the single-family market, rose two points, to 15, in July. The gain offsets much of June’s three-point dip, but it was still the ninth time out of 10 the index has held to the same three-point range.
The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors.
In most months, the government can’t be sure whether starts increased or decreased — in June, the standard error for starts was plus or minus 10.9% — and large revisions are common.
The standard error for monthly building permits data is much lower at plus or minus 1.3%.
