July housing starts ramp up

Construction on new homes best in nearly eight years

WASHINGTON — U.S. builders started work on single-family houses last month at the fastest pace since the recession began in late 2007.

Housing starts in July rose 0.2 percent to a seasonally adjusted annual rate of 1.21 million homes, the Commerce Department said Tuesday. Construction of single-family houses accounted for all of the gains, shooting up 12.8 percent last month to the highest rate since December 2007.

The increase pointed to a housing market that has strengthened for much of the year, reflecting an increased sense of financial security for many Americans amid steady job growth, modest layoffs and relatively low mortgage rates. Continued gains in housing would help extend the current economic expansion.

“More housing starts means more construction jobs as well as confidence from real estate developers that people will be buying,” said Tara Sinclair, a George Washington University professor and chief economist for job site Indeed. “We’ll know the economy is really hitting stride when we see these starts in the range of 1.5 million.”

Total housing starts have risen 11.3 percent year-to-date. The market is attracting more buyers and renters, as starts for apartment buildings have climbed 12.2 percent so far this year despite last month’s drop.

The improved housing market has already benefited sales at supply stores such as Home Depot. The world’s largest home improvement retailer reported Tuesday that sales at U.S. stores open at least one year had climbed 5.7 percent during the second quarter, pushing its stock to an all-time high of $123 in morning trading.

But Tuesday’s report also showed the potential limits of further gains from new construction as the number of building permits fell, a possible sign that demand will need to continue improving to further the pace of homebuilding.

“It is in all likelihood going to take another leg up in new single-family home sales to sustain the pace of single family starts that was recorded in July,” said Joshua Shapiro, chief U.S. economist at the consultancy MFR.

Approved building permits decreased 16.3 percent in July to an annual rate of 1.12 million, after achieving an eight-year high in June.

The decrease likely reflects some pullback after months of gains and was caused primarily by a sharp plunge in permits to construct apartment complexes after a tax break expired in New York.

Homebuyers and renters have crowded into the housing market this year, pushing up prices to levels that have worsened affordability and placed a potential cap on sales growth.

Builders have relieved some of this financial pressure by ramping up construction, yet the increases in housing starts and building permits still lags the surging demand.