Housing starts in U.S. increased more than forecast in June

WHILE HOME CONSTRUCTION in Rhode Island has been slow of late, there are pockets of new construction, including this development in North Kingstown. Across the country, housing construction continues its steady advance from the depths of the Great Recession. / PBN FILE PHOTO/MICHAEL SALERNO
WHILE HOME CONSTRUCTION in Rhode Island has been slow of late, there are pockets of new construction, including this development in North Kingstown. Across the country, housing construction continues its steady advance from the depths of the Great Recession. / PBN FILE PHOTO/MICHAEL SALERNO

WASHINGTON – New-home construction in the United States rose more than forecast in June, providing some momentum for residential real estate near the end of its busy selling season.

Residential starts increased 4.8 percent to a 1.19 million annualized rate, the most since February, from 1.14 in May that was lower than previously estimated, Commerce Department data showed Tuesday in Washington. Permits, a proxy for future construction, also climbed.

The residential construction industry has remained in a steady but tepid recovery, struggling to make further progress as homebuilders run up against scarce land supply and credit standards stay tight in the eighth year after the last recession. At the same time, stable job gains and prospects for faster wage growth should buoy real-estate demand in the months ahead.

“The housing market is slowly moving forward,” David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, said before the report. “One of the things we’ll see as the labor market continues to tighten is wage growth will pick up, and all of that suggests that housing activity should strengthen as the year goes on.”

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The median forecast in a Bloomberg survey of 73 economists projected June starts at 1.165 million, little changed from the previously reported 1.164 million for May. Estimates ranged from 1.095 million to 1.2 million.

Volatile data

The starts data, while very volatile from month to month, have held in a narrow range over the past year, indicating residential real estate will have trouble adding to its post-recession rebound. Still, the report showed a wide range for error, with a 90 percent chance that last month’s figure was between an 8.7 percent decline and an 18.3 percent gain.

Permits climbed 1.5 percent to a 1.15 million annualized rate, matching the median forecast of economists surveyed by Bloomberg. Because the number of applications were lower than starts, it suggests it will be difficult to sustain last month’s gain in home building.

Beginning construction of single-family houses rose 4.4 percent to a 778,000 rate, the most since February, from 745,000 in May.

Groundbreaking on multifamily homes, such as townhouses and apartment buildings, climbed 5.4 percent to an annual rate of 411,000, the most since September. Data on these projects, which typically have led housing starts over the past few years, can be especially volatile.

Starts climbed in two of four regions, led by a 46.3 percent surge in the Northeast. They rose 17.4 percent in the West to 317,000, the most since July 2007.

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