Housing starts in June cooled from the torrid levels posted earlier this year, according to figures released by the U.S. Commerce Department. Overall, the June construction rate was just above 1.8 million units, down 8.5 percent from May’s upwardly revised rate of 1.97 million.
“A 2 million starts rate is not sustainable, but something on the order of 1.8 million or 1.9 million is,” said Bobby Rayburn, a home and apartment builder from Jackson, Miss., and president of the National Association of Home Builders (NAHB). “Our builder surveys indicate that they are very confident about the future. The market fundamentals remain healthy, with strong consumer demand, lean inventories and a favorable interest rate structure.”
“When interest rates began to rise in April and May, buyers jumped into the marketplace, creating an unsustainable surge in the single-family sector,” said NAHB Chief Economist David Seiders. “With rampant speculation in financial markets that the Federal Reserve was about to launch an aggressive process of monetary tightening at the end of June, builders apparently became somewhat cautious, trimming both housing starts and permit issuance during the month. However, Fed policymakers ultimately issued a reassuring statement at the conclusion of the June 30 FOMC meeting, and mortgage interest rates have fallen back to below 6 percent since then. This certainly bodes well for housing in the coming months.”
Single-family housing starts fell 9.5 percent in June to a pace of 1.489 million. This was a 1.1 percent drop from the June 2003 pace, although single-family starts were up by 12.2 percent on a year-to-date basis.
Seiders said he expects single-family starts to post an all-time high in 2004, surpassing last year’s record of 1.499 million units.
The pace of multifamily housing starts decreased 3.7 percent from May to a seasonally adjusted annual rate of 313,000 units. This was 9.3 percent below June of last year, although multifamily starts still were up by about 6 percent on a year-to-date basis.
Construction of new homes and apartments fell in all four regions.