New-home construction continued to search for its landing strip in July, when housing starts declined by 1% from June, to a seasonally adjusted annual rate of 581,000 units. This number represented the first monthly decline in three months and fell below economists’ projections. The annualized July starts were 37.7% below the same month a year ago, according to Census Bureau estimates released Tuesday morning.
Single-family starts in July jumped 1.7% over revised June figures, to an annualized rate of 490,000. However, overall starts were dragged down by a 16.7% drop-off in multifamily starts, to 80,000 units. The single-family estimates were 22.5% below the July 2008 figure, while multifamily starts were 72.1% under July 2008 estimates.
Based on Census data that were not adjusted for seasonality, 55,600 homes were actually started in July, which was 5.9% below the actual starts in June, and 35.9% under actual starts in July 2008. The actual number of single-family starts in July, 47,700, was off 4.2% from June and 20.4% from July 2008.
Housing analysts aren't ready to call an end to the recession just yet. Wells Fargo's Carl Reichardt Jr. observes that builders have been benefiting from the $8,000 federal tax credit for first-time home buyers, as well as the lowest levels of sitting new-home inventories (281,000 units) since 1993. However, as that credit nears its expiration date, "we believe starts activity may begin to drag." Michael Renaut of JPMorgan Chase is maintaining a negative investment stance on the housing sector because of his company's pessimistic outlook on higher unemployment, tight credit, rising foreclosures, and elevated inventory.
A somewhat sunnier perspective came from Patrick Newport, U.S. chief economist for IHS Global Insight, who expects single-family starts to continue improving nationally for at least the next few months. However, Newport also thinks recovery in the housing sector will take two or three years.
Builders are typically more optimistic than industry observers about their fortunes, as evinced by the rise in their confidence as tracked by the NAHB/Wells Fargo Housing Market Index. However, that confidence, for the moment at least, is still translating into only moderate construction activity. Building permits, a harbinger of future building, hit an annualized rate of 560,000 in July, down 1.8% from June and 39.4% from July 2008. Single-family permits, on the other hand, were up 5.8% over June to an annualized rate of 458,000, but 20.3% below July 2008 estimates. Multifamily permits were down 26.3% in July from June to 84,000; that’s 73.2% fewer than the annualized level of multifamily permits in July 2008.
The number of homes completed in July rose 0.9% to an annualized level of 802,000, although that was 26.4% below home completions in July 2008. Month-to-month single-family completions were up 4.1%, but multifamily completions were down from June by 4.2% to 297,000.
John Caulfield is a senior editor for BUILDER magazine.
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