Housing starts hit lowest pace in 18 months
http://money.cnn.com/2006/07/19/news/economy/housing_starts.reut/index.htm
Housing starts hit lowest pace in 18 months
Homebuilding falls more than expected in June, with the biggest drop in the Northeast.
July 19 2006: 12:44 PM EDT
WASHINGTON (Reuters) -- Groundbreaking for U.S. homes resumed their decline in June, as single-family housing starts fell to their slowest pace in 1-1/2 years, with a sharp plunge in the Northeast, a government report showed on Wednesday.
The Commerce Department said June housing starts fell 5.3 percent in June to a 1.850 million unit annual pace, from a downwardly revised 1.953 million unit pace in May. The rise in May, driven by an unexpected jump in multifamily starts, interrupted three straight monthly declines.
June housing starts fell short of economists' expectations of a decline to 1.90 million unit pace from May's originally reported 1.957 million unit pace.
The Northeast was hit with the sharpest declines, with single-family housing starts in the region plunging 32.8 percent to a 92,000-unit annual pace in June, registering their biggest monthly drop since March 1984 and the slowest annual pace since January 1996.
In the United States as a whole, permits for future groundbreaking, an indicator of builder confidence, fell 4.3 percent in June to a 1.862 million unit pace, the slowest since May 2003. Economists polled by Reuters expected June permits to fall to 1.920 million units after an upwardly revised 1.946 million units, originally reported as 1.932 million.
"The slowdown in the housing market may be orderly but it is significant nonetheless," said Joel Naroff, president of Naroff Economic Advisers in Holland, Pa. "Housing starts tumbled in June and builders are in full retreat."
Compared with a year earlier, June housing starts were down 11.0 percent and housing permits were down 14.9 percent.
U.S. single-family housing starts fell 6.5 percent to an annual pace of 1.486 million units, the slowest since November 2004.
Total Northeast housing starts fell 11.5 percent in June, while total Northeast permits rose 6.1 percent, driven entirely by multi-family plans as Northeast single-family permits fell 3.9 percent in June.
Multifamily construction refers to homes with at least five units, such as apartment buildings.
In the West, total housing starts fell 10.2 percent, with single-family starts down 5.9 percent, and total permits down 7.6 percent. June housing starts in the South fell 4.0 percent, while permits fell 5.3 percent. In the Midwest, June housing starts rose 3.0 percent, but permits dipped 1.6 percent.
Construction of multifamily buildings, which had been showing some lingering signs of strength in recent months, were weaker in June, as starts for buildings with five or more units fell 4.1 percent to an annual rate of 306,000. Permits for such buildings, however, rose 6.1 percent to an annual pace of 397,000.
In remarks to the Senate Banking Committee, Federal Reserve Chairman Ben Bernanke said housing prices are rising significantly less rapidly than previously.
He noted that this was not surprising, as sustained price increases, together with some increase in mortgage rates, has reduced the affordability and thus the demand for new homes.
If Bernanke "still thinks there are inflationary concerns he's going to continue to raise the fed funds rate and that will trickle into continuing to cool off the housing market," said Bob Moulton, president of the Americana Mortgage Group in Manhasset, N.Y.
The data also comes a day after a confidence index for U.S. home builders plummeted to its lowest level in more than 14 years in July as buyers canceled contracts and investors pulled back from housing.
The National Association of Home Builders said sentiment among home builders dropped 3 points to a reading of 39 in July, below forecasts from economists and the lowest since December 1991, when the U.S. was emerging from a recession.
On Wednesday, the Mortgage Bankers Association reported U.S. mortgage applications fell last week for the first time in three weeks, largely reflecting a steep drop in home purchase loans even as mortgage interest rates dipped.
The MBA said its seasonally adjusted index of mortgage application activity for the week ended July 14 decreased 4.6 percent to 540.8 from the previous week's 566.8.
