The Canadian Press - ONLINE EDITION

US home construction drops 9.3 per cent in June to rate of 893,000, slowest pace in 9 months

  • Print

WASHINGTON - U.S. home construction fell in June to the slowest pace in nine months, a setback to hopes that housing is regaining momentum and will boost economic growth this year.

Construction fell 9.3 per cent last month to a seasonally adjusted annual rate of 893,000 homes, the Commerce Department said Thursday. That was the slowest pace since last September and followed a 7.3 per cent drop in May, a decline even worse than initially reported.

Applications for building permits, considered a good indicator of future activity, were also down in June, dropping 4.2 per cent to a rate of 963,000 after a 5.1 per cent decline in May.

The worse-than-expected June performance reflected a big drop in activity in the South, where construction plunged by 29.6 per cent last month.

Analysts, however, said that the June decline in construction may have been influenced by temporary factors such as heavy rain in parts of the South which could have held back housing starts in that region.

Jennifer Lee, senior economist at BMO, said it was too soon to conclude that the housing recovery has stalled. "After all, job growth continues, mortgage rates are near their lows for 2014 and homebuilder confidence has been increasing," she said in a research note.

The overall weakness reflected a 9 per cent fall in construction of single-family homes, the biggest part of the market, and a 9.9 per cent drop in construction of apartments and other multi-family units.

All of the June weakness was confined to the South, where about 40 per cent of home construction occurs. Construction was up 14.1 per cent in the Northeast, 28.1 per cent in the Midwest and 2.6 per cent in the West.

Home construction has struggled to gain traction this year, limiting its ability to contribute to economic growth. Part of the weakness reflected an unusually severe winter which hampered construction. But rising home prices, a rise in mortgage rates from historically low levels and tighter lending standards imposed since the financial crisis have also been a barrier, especially for potential first-time buyers.

There still is hope that housing will perform better in the second half of the year although Federal Reserve Chair Janet Yellen told Congress this week that the slowdown in housing is one of the concerns at the Fed and that its forecast for an economic rebound may prove to be too optimistic.

The National Association of Home Builders, however, reported Wednesday that homebuilder confidence surged in July, reflecting heightened expectations that the second half of the year will see rising sales. The builders' sentiment index rose to 53, up four points from a revised reading of 49 in June. Readings above 50 indicate more builders view sales conditions as good rather than poor. The July reading was the first month above 50 since January when the index stood at 56.

New home sales surged 18.6 per cent in May to a seasonally adjusted annual rate of 504,000, the highest level in six years, while sales of previously owned homes rose 4.9 per cent, the biggest one-month gain in nearly three years, to a rate of 4.89 million homes.

Even with the big May increases, sales of new homes are still running at just about half the pace of a healthy real estate market.

Economists expect there is a lot of pent-up demand for homes after many potential buyers put off purchases during the 2007-2009 recession and the weak recovery since that time. Job growth has accelerated in recent months, with an increase of 288,000 jobs in June. That has helped to push down the unemployment rate to a nearly six-year low of 6.1 per cent in June.

There is optimism that employers will step up their hiring further in the second half of this year as they respond to a rebound in overall economic growth following a weak winter.

The economy shrank at an annual rate of 2.9 per cent in the January-March quarter but analysts believe growth rebounded to around 3 per cent in the April-June quarter and will remain around that level for the remainder of this year.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Bowman questioned on financial solutions for city

View more like this

Photo Store Gallery

  • JOE.BRYKSA@FREEPRESS.MB.CA Local-(  Standup photo)-    A butterfly looks for nector on a lily Tuesday afternoon in Wolseley-JOE BRYKSA/WINNIPEG FREE PRESS- June 22, 2010
  • A monarch butterfly looks for nectar in Mexican sunflowers at Winnipeg's Assiniboine Park Monday afternoon-Monarch butterflys start their annual migration usually in late August with the first sign of frost- Standup photo– August 22, 2011   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos

Poll

Do you think the Jets' three pre-season losses in a row are a sign of things to come?

View Results

View Related Story

Ads by Google