Housing Starts Build Momentum

July housing starts beat consensus forecasts, rising by 2.1 percent to 1.211 million, seasonally adjusted, HUD and the Census Bureau reported yesterday.

The report said July housing starts rose by 5.6 percent from a year ago (1.147 million). Single-family housing starts rose by 0.5 percent to 770,000 from June’s revised 766,000. The July rate for units in buildings with five units or more rose to 433,000 from June’s revised 400,000, an increase of 8.3 percent.

Regionally, housing starts rose in the South, Midwest and Northeast and fell in the West. In the Northeast, starts rose by 15.5 percent to 134,000 units, seasonally adjusted, from 116,000 starts in June and but fell by nearly 16 percent from a year ago. In the Midwest, starts rose by 2.3 percent to 175,000 units from 171,000 in June and improved by 2.3 percent from a year ago.

In the largest region, starts in the South rose by 3.5 percent in July to 613,000 units, seasonally adjusted, from 592,000 in June and improved by 11.1 percent from a year ago. In the West, however, starts fell by nearly 6 percent to 289,000 units from 307,000 in June but improved by 9.1 percent from a year ago.

“Although single-family starts eked out a modest 0.5 percent gain in July, the trend is a bit more encouraging as fundamentals are supportive of gains,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C.

Privately owned housing units authorized by building permits in July fell to a seasonally adjusted annual rate of 1.152 million, 0.1 percent below June’s revised 1.153 million but 0.9 percent higher than a year ago (1.142 million). Single-family authorizations in July fell by 3.7 percent to 711,000 from June’s 738,000; authorizations of units in buildings with five units or more rose by 6.5 percent 411,000 in July from 386,000 in June.

“With permits typically providing a fairly good reading of future construction activity, we suspect single-family is beginning to lose steam,” Vitner noted. “That said, strength in builder sentiment, still-low mortgage rates and better lending standards suggest there is still room to grow.”

Privately owned housing completions in July fell to 1.026 million, an 8.3 percent drop from June’s revised 1.119 million but 3.2 percent higher than a year ago (994,000). Single-family housing completions fell by 0.4 percent to 743,000; the July rate for units in buildings with five units or more fell to 275,000, nearly 25 percent lower than June.