New-home construction in the United States climbed in July to
the highest level in almost eight years, indicating the industry will pick up
in the second half of the year.
Residential starts rose 0.2 percent to a 1.21 million
annualized rate, the most since October 2007, from a 1.2 million pace in the
prior month that was higher than previously estimated, a Commerce Department
report showed Tuesday.
Rising employment and historically low mortgage rates are
enticing buyers, while increasing prices induced by a lack of homes on the
market is an incentive to start new developments. Data showing builder
sentiment at a decade high in August underscores the view that the housing
rebound will stay on track even as the Federal Reserve is poised to boost
borrowing costs.
"There's enough demand and there's a little catch-up
going on here in terms of housing construction," said Eric Green, head of U.S. economic research at TD Securities in New York , who projected a
1.2 million pace. "When we're adding homes like this, it has a significant
multiplier effect on the economy, in housing-related retail sales, jobs,
consumption. We are exactly where we want to be in housing."
Building permits decreased to a 1.12 million annualized
rate. The 16.3 percent drop was the biggest since July 2008. They were
projected to decrease to a 1.23 million rate after 1.34 million the prior
month.
Authorizations have been see-sawing because of changes in
legislation in the Northeast, where permits plunged by 60 percent last month.
Still all four regions of the country saw declines in July.
The increase in starts last month was led by a 12.8 percent
gain in construction of single-family houses, taking them to a 782,000 rate,
the most since December 2007.
Work on multifamily homes, such as condominiums and
apartment buildings, fell 17 percent to an annual rate of 424,000. Data on
these projects, which have led housing starts in recent years, can be volatile.
Prospective home-buyers continue to face relatively low
borrowing costs. The average 30-year, fixed-rate mortgage was 3.94 percent in
the week ended Aug. 13, below last year's high of 4.53 percent reached in early
January 2014, according to data from Freddie Mac in McLean , Va.
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