home buildingThe bad news in the nation's housing sector continued in July. The month's housing starts actually inched higher to a 546,000 annual rate -- but it was an increase on June's figure only because of a large downward revision, to 537,000, in the previous month's housing start total.

A Bloomberg survey had expected July housing starts to rise higher to a 565,000 annual rate, from a revised 537,000 in June, which is down from the previously released 549,000 total. A year ago, in July 2009, starts totaled a 587,000 annual rate.

Equally significant, single-family home starts fell 4.2% in July to a 432,000 annual rate -- its lowest level since May 2009.

Starts Down Despite Home Buyer Assistance

What's more, housing starts are now down 7% on a year-over-year basis -- this after two phases of the home buyer tax-credit program. Starts are also down about 75% from the 2006 peak registered during the housing boom.

In July, housing starts fell in two of four regions. They rose 6.2% in the Northeast, climbed 8.8% in the Midwest, fell 5.8% in the South and plummeted 14.7% in the West.

Further, building permits -- considered a leading indicator of residential construction -- also fell 3.1% in July to 565,000, including a 1.2% reduction in single-family home building permits to 416,000.

Economists follow the housing starts statistic because of the large role residential real estate has played historically in the U.S. economy. Housing affects commerce in companion sectors, such as furniture, appliances, insurance and landscaping, among others. Hence, a sustained increase in housing starts usually puts upward pressure on GDP.

July's disappointing housing starts report will likely intensify concern that the housing sector is not generating enough organic demand to power the sector's recovery. Decreased home purchases due to the 2007-to-2009 recession, combined with a rise in foreclosures, have led to a large inventory of unsold new and existing homes and discouraged builders from constructing new residences.

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I'm in a bit of a micro-region, the Pacific Northwest. We're usually lumped in to "The West" but we don't experience the dramatic ups and downs of the big bear to the South - California. New home sales here are picking up. For more information on Pacific Northwest real estate, visit: http://www.networksrealestate.com.

August 18 2010 at 12:23 AM Report abuse rate up rate down Reply
Darrell Hansen

Why is anyone building new homes when existing homes are plentiful and selling for less then they cost to build? I can tell you from 3 recent experiences (sold a second home in Vegas and tried buying 2 homes in Phoenix) that it does not pay anymore to do upgrades. In all 3 cases the appraiser valued the home less than the contract price killing 2 of the 3 deals. In phoenix, they looked primarily at sales in area per sq. foot and added little or nothing for upgrades. I would never upgrade a home these days if I wanted to ever recoup the money.

August 17 2010 at 10:03 PM Report abuse +1 rate up rate down Reply

I cannot speak for all markets but I know for a fact that the Florida housing market is still glutted with never occupied spec McMansions that flippers were building and selling back and forth to one another that have never been lived in. For housing to recover we need strong job recovery that delivers living wage jobs. The myth of supply side prosperity has been busted.

August 17 2010 at 5:43 PM Report abuse -1 rate up rate down Reply

Rose from what

August 17 2010 at 3:27 PM Report abuse -2 rate up rate down Reply