Housing construction down but looking up for the coming months

By Vicki Needham - 08/16/12 04:30 PM ET

Builders started construction on fewer houses last month but they are planning to pick up the pace in the coming months.

Housing production fell 1.1 percent to a seasonally adjusted annual rate of 746,000 units in July, according to figures released Thursday by the Housing and Urban Development Department and the U.S. Census Bureau.

Meanwhile, the issuance of new building permits, usually an indicator of future building activity, jumped 6.8 percent to a seasonally adjusted annual rate of 812,000 units in July, the fastest pace in nearly four years.

Single-family permits rose 4.5 percent to 513,000 units, their best showing since March of 2010, while permits for multifamily units increased 11.2 percent to 299,000 units.

"Our latest surveys confirm builders' increased confidence about future home buyer demand, and that's reflected in today's permit numbers," said David Crowe, chief economist for the National Association of Home Builders (NAHB).

"Increasingly, housing is reemerging as a traditional and much-needed source of strength in local economies as builders are able to put more of their crews back to work," he said.

Permit issuance also rose in three out of four regions in July, with the Northeast up 12.2 percent, the South up 5.8 percent and the West jumped 14 percent. The Midwest posted a 4.2 percent decline.

Despite the improvement, builders are still struggling to access credit for new projects and get accurate appraisals on new homes.

After four consecutive months of gains, single-family housing starts fell back 6.5 percent to a seasonally adjusted annual rate of 502,000 units in July.

Meanwhile, multifamily starts posted a 12.4 percent gain to 244,000 units, their strongest pace since February.

On a regional basis, combined single- and multifamily starts declined 1.3 percent in the Northeast, 3.5 percent in the South and 5.3 percent in the West, but rose 17 percent in the Midwest in July.

"While many builders believe that the outlook for housing is considerably brighter than it has been in years, we are being very careful about keeping inventories tight and not building ahead of demand," said Barry Rutenberg, chairman of the NAHB and a home builder from Gainesville, Fla.

"At the same time, builders are drawing more permits for new construction so we can accommodate buyers and renters as they return to the marketplace."