New-Home Starts Take an Unexpected Dive

Builders started construction on fewer new homes than expected in June, and permits for future construction also fell, the Commerce Department reported Wednesday.

Housing starts fell nearly 10 percent last month to the lowest level since August 2012. Housing permits—a gauge for future home construction—dropped 7.5 percent, posting a second consecutive month of declines. The report follows an industry index that showed builders’ confidence about the new-home sector was at its highest level since 2006.

Some economists weren't alarmed by the June decline in housing starts, attributing it to wet weather that pushed off construction projects in many parts of the country. The drop was also moslty present in the volatile multifamily housing sector, where starts fell 26.2 percent. Single-family home construction—the largest segment of the index—had a much more mild decline of 0.8 percent.

With builder confidence so high, several housing analysts say they expect housing starts to pick up in July.
"Since builders are under-supplying the market, inventories are likely to get leaner in the months ahead, and prices are likely to accelerate," Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Reuters. "This will bring more builders into the market."

Source: National Association of Realtors