New-Home Market Loses Some Momentum

August 19, 2013

Housing starts increased 5.9 percent in July, but the uptick was mostly due to a surge in multifamily housing construction last month, the Commerce Department reports. Single-family housing starts fell 2.2 percent in July and hit an eight-month low. 

"They're just not showing recent strength," Patrick Newport, economist with IHS Global Insight, told USA Today. "This market has lost some of its momentum."

A combination of factors may be at play. Rising borrowing costs, tight credit conditions, and labor and lot shortages may be causing builders to be more hesitant to begin projects, analysts say. 

Still, single-family housing starts are up 24 percent over 2012 levels, so an upswing in construction is still evident, regardless of recent drops. Building permits—an indicator of future housing starts—increased 2.7 percent in July compared to June. That number is 12.4 percent above year-ago levels. 

Overall, housing starts remain 40 percent below what’s considered normal for the new-home sector. Despite last month’s 5.9 percent uptick, housing starts were at a seasonally-adjusted annual rate of 896,000—still below the 1 million rate that most economists look for in the sector. 

Source: “Housing starts rise 5.9% in July,” USA Today (Aug. 16, 2013)

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