New residential construction drops in July

Construction of single-family homes — which accounts for about 70 percent of home construction — fell 4.9 percent to 425,000. Multifamily building increased 7.8 percent while apartment construction increased by more than 6 percent.

Building permits — an indicator of future construction — fell 3.2 percent to a 597,000 annual pace, following a small increase in June. Private-sector analysts had expected a 1.8 percent decline, according to Commerce. 

Weighing in seasonal factors, there were 413,000 units under construction in July, the fewest since 1970.

There were broad differences regionally, with housing starts dropping 38 percent in the Midwest and rising 35 percent in the Northeast. Construction was up a more moderate 5.6 percent in the South while falling 3 percent in the West.

“There are still a significant number of foreclosed homes on the market across the country, making it more difficult for the new housing market to grow,” said Acting Commerce Secretary Rebecca Blank. 

“Our focus is on job creation, because as more people find employment in good-paying jobs, they will become more likely to invest in a home — driving the inventory of foreclosed homes down and the construction of new homes up.”

Despite record-low mortgage rates, a high number of foreclosures, falling prices, tight lending standards, unemployment higher than 9 percent and homeowners in negative equity are hampering the housing sector’s recovery. 

New-home sales fell in June to a seasonally adjusted annual rate of 312,000 homes as foreclosures offered better deals for potential homebuyers. 

Pessimism remains high for homebuilders, as the National Association of Home Builders said Monday that its index of builder sentiment remained stuck at 15 in August, continuing a dismal two-year trend of negative feelings about the market. 

Any reading less than 50 indicates negative sentiment about the housing market. The last time it hit 50 was in April 2006, at the market’s peak.

Although new home sales constitute only about 20 percent of the market, they make a much larger economic contribution — leading to an average of three new jobs and about $90,000 in taxes per year, according to the NAHB.