Builders' Optimism Grows as Housing Starts Rise

July 19, 2011

Builders broke ground on more new homes than expected last month, reaching a six-month high in housing starts and also seeing a rebound in permits for future construction, the Commerce Department reported Tuesday in its new-home report.

The biggest bright spot: Construction of apartment buildings. Housing starts for multi-family homes rose about 30 percent last month. Single-family home construction — which makes up the largest portion of the new-home market — also increased, rising 9.4 percent.

Overall, housing starts for the new-home market in June increased 14.6 percent to an annual rate of 629,000 units. That marks its highest level since January. However, housing starts still remain about half the 1.2 million homes per year pace that economists consider healthy for the sector.

But builders’ outlook for the market is improving. Sentiment among home builders rose in June, after reaching a nine-month low the previous month, the National Association of Home Builders reported on Monday.

Part of the reason for some of the optimism: New building permits — an indication for future building — increased 2.5 percent in July to a 624,000-unit pace. Permits received a boost from the multi-family segment, in which permits for buildings with five units or more rose 8.2 percent, reaching its highest level since October 2008.

Source: “U.S. Housing Starts Hit 6-Month High, Permits Up,” Reuters News (July 19, 2011) and “Apartment and Condo Construction Drives 14.6 Percent Surge in New Homes in June,” Associated Press (July 19, 2011)