Housing Starts Cool at an Orderly Pace in July
The nation’s cool-down in housing production continued at an orderly pace in July, with a 2.5% decline to a seasonally adjusted annual rate of 1.795 million units, the Commerce Department reported last week, leaving the pace of residential construction last month down 13.3% from a year earlier.
Single-family housing starts in July dropped 2.3% to an annual rate of 1.452 million units, which was 16.6% below last July, and multifamily construction fell 3.4% to 343,000 units.
“The moderate decline in starts was anticipated and shows that builders are adjusting to changing market conditions,” said NAHB President David Pressly. “A drop in permits shows that builders are not planning to start as many homes in the near future, and many are offering incentives to prospective buyers in order to control their current inventory positions.”
“Housing demand has been weakening as affordability has deteriorated and investors/speculators have pulled out of the market, and builders are adjusting their production levels accordingly,” said NAHB Chief Economist David Seiders. “Builders also are offering a variety of incentives to bolster sales and limit sales cancellations as inventories have climbed.”
The total number of building permits issued in July decreased 6.5% to a seasonably adjusted annual rate of 1.747 million units, 20.8% below the year-earlier pace. Single-family permits declined 6.1% to a 1.318 million unit yearly pace, reflecting a downturn in permits in all regions of the country. Multifamily permits were down 7.7% to 429,000 units, which was 11.4% lower than a year earlier.
July’s housing starts were down 2.5% in the South, 2.9% in the West and 7.0% in the Northeast. Starts rebounded a slight 0.7% in the Midwest, to a production level 16.6% below July of 2005.
“We expect the downswing in starts and permits to continue for several months, although solid economic fundamentals, a favorable financing environment, and widespread use of sales incentives will limit the degree of decline,” said Seiders. “We are currently projecting a 9.4% decline in total housing starts for 2006, with single-family starts expected to be off by 10.8% from the record level of 2005.”
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