Starts in new-home construction dropped 2.5 percent in July, according to figures released by the Commerce Department, continuing the orderly cool down of the housing market. Housing starts declined to a seasonally adjusted annual rate of 1.795 million units. This was 13.3 percent below the peak pace of a year ago when activity in the housing market was operating at unsustainable levels.
Single-family housing starts were down 2.3 percent for the month to a pace of 1.452 million units, a 16.6 percent drop from the July 2005 pace. Multifamily housing construction was down 3.4 percent for the month to a seasonally adjusted pace of 343,000 units.
“The moderate decline in starts was anticipated and shows that builders are adjusting to changing market conditions,” said David Pressly, president of the National Association of Home Builders (NAHB) and a home builder from Statesville, N.C. “The drop in permits shows that builders are not planning to start as many homes in the near future, and many are offering incentives to prospective buyers in order to control their current inventory positions.”
“Housing demand has been weakening as affordability has deteriorated and investors/ speculators have pulled out of the market, and builders are adjusting their production levels accordingly,” said NAHB Chief Economist David Seiders. “Builders also are offering a variety of incentives to bolster sales and limit sales cancellations as inventories have climbed.”
Issuance of total building permits decreased 6.5 percent in July to a seasonably adjusted annual rate of 1.747 million units, 20.8 percent below the pace of a year ago. Single-family permit issuance was down 6.1 percent on a national basis to a pace of 1.318 million units for the month, reflecting declines in all regions of the country. The pace of multifamily permit issuance was down 7.7 percent to 429,000 units. This pace was 11.4 percent below a year earlier.
Regionally, housing starts generally mirrored the national decline as three of four regions reported decreases for the month. Construction of new homes and apartments was down 2.5 percent in the South and 2.9 percent in the West. The decline in the Northeast was deeper at 7.0 percent. In the Midwest, housing starts rebounded a slight 0.7 percent for the month but were 16.6 percent below July of last year.