RTTNews - Housing starts showed an unexpected decrease in the month of July, according to a report released by the Commerce Department on Tuesday, with the data likely to lead to some renewed concerns about the outlook for the housing market.
The report showed that housing starts fell 1.0 percent to an annual rate of 581,000 in July from the revised June estimate of 587,000. Economists had expected starts to rise to 598,000 from the 582,000 originally reported for the previous month.
With the decrease, housing starts in July were down 37.7 percent compared to the same month a year ago, although they are still up considerably compared to the record low set in April.
The unexpected decrease in housing starts came as a drop in new construction of multi-family homes more than offset a modest increase in new construction of single-family homes.
While the July rate for buildings with five units or more fell 16.7 percent to 80,000 from 96,000 in June, single-family housing starts rose 1.7 percent to a rate of 490,000 in July from 482,000 in the previous month.
However, Peter Boockvar, equity strategist for Miller Tabak, said, With a market that still has too many single family homes, less than expected building would have been better for the longer term condition of the housing industry at the short term expense to residential construction.
On a regional basis, housing starts in the Northeast showed a notably decline, falling by 16.3 percent. While starts in the South and West also fell by 1.4 percent and 1.6 percent, respectively, starts in the Midwest jumped 12.9 percent.
The report also showed that building permits, an indicator of future housing demand, fell 1.8 percent to an annual rate of 560,000 in July from the revised June rate of 570,000. Subsequently, permits were down 39.4 percent compared to the same month a year.
Economists had been expecting a modest increase in permits to a rate of 577,000 compared to the 563,000 originally reported for the previous month.
As with housing starts, the unexpected drop in building permits came as a 26.3 percent drop in permits for multi-family homes more than offset a 5.8 percent increase in single-family authorizations.
Despite the unexpected drops in permits and starts, Christoph Balz, an analyst for Commerzbank, said, The housing market is obviously stabilizing and should be past the low point in the current cycle.
The stabilization in the housing sector should contribute to GDP growth swinging back into positive territory in the current quarter, Balz added.
Monday afternoon, the National Association of Home Builders released its report on homebuilder confidence in the month of August, showing that its homebuilder confidence index rose to its highest level in over a year.
The report showed that the NAHB/Wells Fargo Housing Market Index rose to 18 in August from 17 in July. With the increase, which came in line with economist estimates, the index rose to its highest level since June of 2008.
Home builder expectations have been buoyed by the success of the first-time home buyer tax credit and its anticipated boost to buying activity leading up to the Nov. 30 expiration date, said NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla.
Robson added, The question is what happens after that - whether there will be enough momentum to keep us moving toward a recovery, particularly in light of significant headwinds.
The NAHB noted that it is calling on Congress to extend the first-time home buyer tax credit for another year and to offer it to all income-eligible buyers.
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