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U.S. home construction jumps 15.7 percent in July

Experts say solid job growth and a recent dip in mortgage rates are helping to boost home and apartment construction.  

Associated Press

Experts say solid job growth and a recent dip in mortgage rates are helping to boost home and apartment construction. 

WASHINGTON — U.S. home construction rebounded in July, rising to an eight-month high and offering hope that housing has regained momentum after two months of declines.

The 15.7 percent increase in July reported Tuesday by the Commerce Department followed declines of 4 percent in June and 7.4 percent in May.

Applications for building permits, considered a good sign, also showed strength in July, advancing 8.1 percent to an annual rate of 1.05 million, after declines of 3.1 percent in June and 5.1 percent in May.

The July rebound reflected strength in single-family home construction, which rose 8.3 percent, and in apartment construction, which was up 33 percent.

The strength in July was led by a 44 percent rise in construction starts in the Northeast. Housing construction was up 29 percent in the South, recovering from a 26.8 percent plunge the month before that was blamed in part on heavy rains. Sales rose 18.6 percent in the West, but fell 24.8 percent in the Midwest.

Economists noted that the July performance was much better than expected. Sal Guatieri, senior economist at BMO Capital Markets, said solid job growth and a recent decline in mortgage rates were helping boost construction. But he said weak wage growth and tight lending standards were still depressing activity, especially among first-time buyers.

A report Monday indicated home builders are feeling more confident about their sales prospects, a hopeful sign that home construction and sales of newly built homes could pick up after stalling.

Builders' views of current sales conditions for single-family homes, their outlook for sales over the next six months and traffic by prospective buyers all increased in August.

Sales of new homes are running behind last year's pace. They fell 8.1 percent in June to a seasonally adjusted annual rate of 406,000. A mix of rising home prices, higher mortgage rates and weak wage growth have made it more difficult for potential buyers to buy a newly built home. These factors have particularly depressed demand by first-time buyers.

But economists are still looking for a rebound, given that the U.S. economy has been adding jobs at a healthy clip, with gains topping 200,000 jobs for six straight months through July.

By the numbers

15.7%: Increase in U.S. home construction in July to a seasonally adjusted annual rate of 1.09 million homes, the fastest pace since November

8.3%: Rise in single-family home construction

33%: Increase in apartment construction

8.1%: Increase in building permits in July, to an annual rate of 1.05 million

Source: Commerce Department

U.S. home construction jumps 15.7 percent in July 08/19/14 [Last modified: Tuesday, August 19, 2014 7:19pm]
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