First time home buyers are in luck, construction of new U.S. homes rose in June to the highest level in seven months as builders rushed to pour foundations for homes that must be completed by the end of November in order to be eligible for a special tax break. Buyers can take advantage of a tax credit worth 10 percent of the purchase price, with a cap of $8,000, included in the federal stimulus package.
On Friday, the Commerce Department said that construction of new homes and apartments jumped 3.6 percent last month to a seasonally adjusted annual rate of 582,000 units, from an upwardly revised rate of 562,000 in May. The figured surpassed the 530,000-unit pace estimate that economists predicted, and was the second straight monthly increase after April’s record low of 479,000 units, prompting one economist to write that, “[it is] the most positive housing report in ages.â€ Meanwhile, applications for building permits, seen as a good indicator of future activity, rose almost 9 percent in June.
“The largest spark…has been the looming deadline,” said David Crowe, chief economist for the National Association of Home Builders, referring to the November completion date. His trade group said Thursday that the confidence level of builders has risen to the highest level in nearly a year.
Shares of major homebuilders rose with Beazer Homes and Hovnanian Enterprises up about 5 percent in midday trading. However, the broader stock indexes were hardly changed Friday after Bank of America and Citigroup became the latest banks to report big second-quarter profits but also weakness in their loan portfolios.
Over the past three years, the collapse in the housing market led to soaring loan losses, a severe banking crisis and the longest recession since World War II. Even with the better-than-expected figures, analysts do not expect a quick rebound as companies are still shedding jobs and home prices are falling. Most federal policymakers said it could take five or six years for the economy and the labor market to normalize again. To achieve that, consumers must return to a regular spending groove and housing prices must rise again.
“There’s still a long way to go before one wants to declare anything that begins to look like a strong recovery or success,” said Rebecca Blank, undersecretary of commerce for economic affairs.
This past week, the Federal Reserve projected that the national unemployment rate will pass 10 percent by the end of the year. 15 states and the District of Columbia have already passed that mark, according to federal data released Friday. Additionally, Michiganâ€™s unemployment rate surpassed 15 percent, the first of any state since 1984.