- Gain led by strongest starts in West since July 2007
- Smaller rise in permits signals little scope for more gains
New-home construction in the U.S. rose more than forecast in June, providing some momentum for residential real estate near the end of its busy selling season.
Residential starts increased 4.8 percent to a 1.19 million annualized rate, the most since February, from 1.14 in May that was lower than previously estimated, Commerce Department data showed Tuesday in Washington. Permits, a proxy for future construction, also climbed.
The residential construction industry has remained in a steady but tepid recovery, struggling to make further progress as homebuilders run up against scarce land supply and credit standards stay tight in the eighth year after the last recession. At the same time, stable job gains and prospects for faster wage growth should buoy real-estate demand in the months ahead.
“The housing market continues to chug along quite nicely,” said Thomas Costerg, senior economist at Standard Chartered Bank in New York, whose projection was among the closest in the Bloomberg survey. “With mortgage rates so low, that provided an additional boost to the market, but at the same time we’re close to reaching cruise speed so I don’t think we’re expecting stellar performance going forward.”
The median forecast in a Bloomberg survey of 73 economists projected June starts at 1.165 million, little changed from the previously reported 1.164 million for May. Estimates ranged from 1.095 million to 1.2 million.
The starts data, while very volatile from month to month, have held in a narrow range over the past year, indicating residential real estate will have trouble adding to its post-recession rebound. Still, the report showed a wide range for error, with a 90 percent chance that last month’s figure was between an 8.7 percent decline and an 18.3 percent gain.
Permits climbed 1.5 percent to a 1.15 million annualized rate, matching the median forecast of economists surveyed by Bloomberg. Because the number of applications were lower than starts, it suggests it will be difficult to sustain last month’s gain in home building.
Beginning construction of single-family houses rose 4.4 percent to a 778,000 rate, the most since February, from 745,000 in May.
Groundbreaking on multifamily homes, such as townhouses and apartment buildings, climbed 5.4 percent to an annual rate of 411,000, the most since September. Data on these projects, which typically have led housing starts over the past few years, can be especially volatile.
Starts climbed in two of four regions, led by a 46.3 percent surge in the Northeast. They rose 17.4 percent in the West to 317,000, the most since July 2007.