Housing Starts fall short

Housing Starts fall shortAlthough housing starts in July were higher than June, they were lower than expected. According to the Commerce Department on Friday, U.S. housing starts and permit issuance for future home construction did not reach expectations for the month, which some believe indicates that the rising mortgage rates could be putting a damper on the housing market.

For the month of July, housing starts increased 5.9 percent, which when seasonally adjusted, is at 896,000 units. June’s housing starts have been revised to show 846,000 units, which is an increase over the previously reported figure of 836,000 units. Economists who had been surveyed by Reuters had expected groundbreaking to rise to 900,000 units for July.

Homebuilding permits had increased 2.7 percent during July to reach 943,000. Economists had expected the permits to hit 945,000. Some experts point out that affordability has not seen much change on the historical basis, but some people have been concerned by the higher mortgage rates, so in turn, the housing market is suffering slightly at the moment.

Mortgage rates have spiked in anticipation of the Federal Reserve tapering the $85 billion in bond purchases currently being made each month in efforts to keep low interest rates and to stimulate the economy. Economists are expecting the U.S. central bank to formally announce its plans for tapering at the policy meeting next month. U.S. stocks opened slightly higher after the release of the data.

Last month the residential construction figures could also be a reflection of supply constraints. Builders have blamed the figures on a shortage of materials and labor. Residential construction, however, remains on stronger footing and is believed to make a significant contribution to economic growth for the year.

Thursday’s report showed confidence among single family homebuilders was nearing an eight-year high in August, with builders pleased about prospective sales during the next six months. While residential construction is only about 3.1 percent of gross domestic product, housing has a wider reach in the economy. Analysts estimate that for every home constructed for a single family at least three jobs, which last for a minimum of a year, are created. As of now, economists expect average monthly housing starts for the year of 2013 to surpass 1 million.


During last month, the number of groundbreakings for single-family homes, which is the largest housing market segment, fell 2.2 percent to 591,000 units, the lowest level since November 2012. Starts for multifamily housing units jumped 26 percent to a 305,000 unit rate, which made up for the previous month’s decline. Permits for multifamily homes increased 12.6 percent to total 330,000 units. Single family housing permits fell 1.9 percent to 613,000 units.

Disclaimer: The rates quoted above are basically the average advertised by a particular lending company. No guarantee of taken from the lender’ aspect whether the borrower will qualify for the mortgage rates mentioned in the article. The lenders dole out interest depending upon various facets, some of which may be unique to the borrower.

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About the author

Drew is a regular contributor covering trending topics.