Starts in new-home construction dropped 2.5 percent in July, according to figures released by the Commerce Department on Aug. 16, 2006, 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. Electrical contractors who do residential work may need to monitor this closely in coming months.
Single-family housing starts were down 2.3 percent for the month to 1.452 million units, a 16.6 percent drop from July 2005. Multifamily housing construction was down 3.4 percent for the month to a seasonally adjusted pace of 343,000 units.
“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 David Seiders, chief economist, National Association of Home Builders (NAHB). “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.
“We expect the downswing in starts and permits to continue for several months, although solid economic fundamentals, a favorable financing environment and widespread use of sales incentives will limit the degree of decline,” said Seiders. “We are currently projecting a 9.4 percent decline in total housing starts for 2006, with single-family starts off by 10.8 percent from the record level in 2005.”