US housing recovery remains subdued as groundbreaking, building permits decline in June
US housing starts and building permits declined unexpectedly in June, raising concern the housing recovery will struggle to regain momentum this year.
Groundbreaking for new homes plunged 9.3 percent in June to a seasonally adjusted annual pace of 893,000, the Commerce Department reported today in Washington. Economists forecast housing starts to rise to a 1.018 million pace.
Compared to June 2013, housing starts were up 7.5 percent.
Starts for single-family homes, which represent the largest component of the market, declined 9 percent a seasonally adjusted annual pace of 632,000.
Three of the four US regions saw housing starts increase in June, led by a 28.1 percent surge in the Midwest. Construction increased 14.1 percent in the Northeast and 2.6 percent in the West.
Housing starts plunged 20.1 percent in the South, the largest monthly decline since May 2010.
Housing completions declined 12 percent to 789,000, but were 3.4 percent above the June 2013 rate, official data showed.
Building permits – a gauge of residential building intentions – fell 4.2 percent to a seasonally adjusted annual pace of 963,000, down from the revised 1.05 million unit pace in May. Economists forecast permits to rise to 1.04 million.
Year-on-year, building permits were up 2.7 percent.
Single-family authorizations advanced 2.6 percent to a seasonally adjusted annual rate of 631,000.
Today’s figures suggest the housing recovery will remain subdued for some time, despite an increase in sales in May that boosted homebuilder confidence to the highest level in six months.
Existing home sales rose 4.9 percent in May to a seasonally adjusted annual rate of 4.89 million, as all four regions posted gains, the National Association of Realtors reported earlier this month. May was the third time in ten months existing home sales increased, a sign the market was recovering slowly following the winter freeze.
The sale of new homes, which account for 7 percent of the residential real estate market, advanced 18.6 percent in May to a seasonally adjusted annual rate of 504,000.
May’s home sales raised optimism the housing recovery was getting back on track, as buyers took advantage of moderating house prices and rising inventory levels. However, the number of homes for sale is still below a balanced market, which means housing starts will need to increase to keep prices steady.
Affordability has been one of the biggest culprits of the housing slowdown. House prices and mortgage rates have increased over the past year. According to the NAR, mortgage rates are expected to increase further over the next year.
The median selling price of a new home sold in May was $282,000, up 6.9 percent from the previous 12 months.
Higher sales helped to boost homebuilder sentiment in July, according to the housing market index courtesy of the National Association of Home Builders. Builder sentiment increased four points to 53, the highest level in six months, the Washington-based group reported. A reading above 50 suggests more respondents view current sales conditions as good.
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