Builders Building Rental Buildings

August 17, 2011

This should come as no surprise in our tough economy: Construction was started on fewer new homes last month.

Housing starts fell 1.5 percent to an annual rate of 604,000 in July, according to the U.S. Commerce Department.

The good news: Economists had actually expected an annual rate closer to 600,000.

woman looking at a picture of a house in front of a huge empty lotThe issuance of building permits fell 3.2 percent to a 597,000 annual pace. They were projected to fall, but not that far.

The good news: The pace is 3.8 percent above the levels in July 2010.

Construction of single-family homes fell 4.9 percent to a 425,000 rate in July from June.

The good news: Still, it’s a 9.8 percent increase from the same month last year.

In addition, demand to build new apartment buildings increased in July and housing starts for structures with five or more units was up 6.3 percent from June and 66.7 percent from July 2010.

“Overall housing production held relatively steady in July, with construction of new multifamily projects showing greater strength due to higher demand for rental units,” said National Association of Home Builders Chief Economist David Crowe.

“Going forward, we expect housing production to show modest improvement through the end of this year, particularly in select markets that do not have large inventories of distressed homes and where economic stability is more apparent.”

OK, so the Chicago real estate market is probably not on that list. In fact, the Midwest posted the biggest drop in July housing starts with a whopping 37.7 percent decline. The West fell 3 percent, the South gained 5.6 percent and the Northeast posted a 34.7 percent increase.

Building permits, which can determine future activity, fell 7.1 percent in the Midwest and 7.8 percent in the West, while the South gained 3.6 percent and the Northeast jumped 18.3 percent.

A large housing stock, too many foreclosures and a lack of jobs are all issues pulling the home-building industry down. Concern over housing is one reason the Federal Reserve said this week it would keep borrowing costs at a record low until at least 2013.

“Both builders and buyers continue to exercise a great deal of caution due to uncertainty about the current economic climate, the large number of foreclosed homes on the market, and concerns about access to credit,” said NAHB chairman Bob Nielson.

“Although single-family housing production slid a few notches in July, the number was right in line with the second quarter average, so we view this report as an indication of relative stability.”

Categories: Economy

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