U.S. housing starts fell less than expected in July as builders broke ground on new multifamily units likely to meet demand for rental apartments, while permits for future construction dropped, a government report showed on Tuesday.
U.S. July import prices up 0.3 pct on petroleum
U.S. import prices increased in July due to higher fuel, food and industrial materials costs, a government report showed on Tuesday.
BERNARD BAHMOHL, CHIEF GLOBAL ECONOMIST, ECONOMIC OUTLOOk GROUP, PRINCETON, NEW JERSEY
The problem for homebuilders of course is that there is still such a massive supply of existing homes that are up for sale as well as lots of foreclosed homes still in the pipeline.
As a result homebuyers -- they themselves are few and far between -- but homebuyers tend to eschew new homes because they can get better deals on existing homes or they're able to get substantial discounts on distressed properties. So when all is said and done, I think the market still looks more attractive for homebuyers who are trying to negotiate the best deal on a new home, rather than an existing home. I think home builders realize that problem, which is why homebuilder confidence hasn't really changed much, it's still at very low levels. And I think that reflects the fact that the housing market is still very much in a comatose state.
ROBERT DYE, CHIEF ECONOMIST, COMERICA, DALLAS
Residential construction remains depressed until we see new home sales improve significantly. We are at least six to 12 months away from that. The economy is still weak. Home builders are pulling back. Everyone is on recession watch.
The multi-family market is going to be stronger than the single-family market. That is where we are going to see a relatively tighter market, but that market has always been volatile.
JAY MUELLER, ECONOMIST AND PORTFOLIO MANAGER, STRONG CAPITAL
MANAGEMENT INC, MENOMONEE FALLS, WI
I would characterize housing as just bumping along bottom. If you look back at the chart, we got to these levels around 2008, and since then we've gone nowhere... There's been no forward progress. We're not going down, but it shows no sign of turning around. There's been a lot of overhang on the market. Even in absolute terms, there isn't much demand.
I don't expect to see it pick up in the second half of the year. We're still a year or more away from any meaningful move. We've got a way's to go.
It's an easy number to dismiss because it's been so bad for so long.
AVERY SHENFELD, ECONOMIST, CIBC WORLD MARKETS, TORONTO
The drop in starts was 4.9 percent for single-family dwellings, which carry more weight per unit in terms of GDP than multi-family starts. Starts are still up nearly 10 percent from a year ago, but that's off a very low base by historic standards. At least for now, housing is more of a neutral or even slightly positive factor for GDP than a big negative.
NICHOLAS COLAS, CHIEF MARKET STRATEGIST, THE CONVERGEX GROUP, NEW YORK
Data is broadly in line, housing data one a little better, one a little worse...not a lot of a variation there.
Import prices were unexpected. But even with this data point in the mix it doesn't seem that inflation is yet a really significant threat. And when you lay around the fact that oil prices are coming down...inflation isn't something you've got to worry about right away. A combination of a soft economy and lower oil prices should put that concern on the back burner.
PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO, NEW YORK
The positive trend in multi-family construction continues at the expense of single-family. On one hand, the market needs less single-family homes so slow starts are a positive but on the other hand, more new apartment buildings available will make it even less attractive to buy existing homes.
Irrespective, the market is continuing to adjust to a reduction in the national home ownership rate at the same time the supply of existing single family homes remain excessive.
YELENA SHULYATYEVA, U.S. ECONOMIST, BNP PARIBAS, NEW YORK
It's as expected. We saw some weakness in the July number. It looks like we are bouncing within a tight range over the past couple of years. The drop is driven by single-family construction. The multi-family starts have risen for a second month in a row. It looks like there is some demand for rental properties.
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
July's numbers align with the first six reports of the year, which have made clear that housing construction is underwhelmed and the industry will continue to have slack until sales revive. With the promise that newly-lower mortgage rates will stay low until mid-2013 (a byproduct of the Fed communicating their plans to hold their rate until then), hopefully the revival will commence by year's end. Once competitively-priced existing and foreclosed properties start to leave the market, new homes rebound would start soon thereafter.