Home building increases to highest level in five months

Locke warned that failure by the White House and Congress to reach an agreement on raising the debt ceiling by Aug. 2 would lead to greater problems in the housing sector and economy as a whole. 

“If America fails to meet its obligations, it would lead to a sharp decline in household wealth and higher mortgage rates, which would profoundly damage the housing market’s recovery,” he said. “Now is the time for members of both parties to make tough choices and take a balanced approach to solve this problem, so we can focus on getting more Americans back to work.”  

Despite the uptick housing starts, the struggling industry is still producing less than half of the 1.2 million homes a year that economists say represent a healthy housing sector. 

Meanwhile, building permits, a gauge of future construction, increased unexpectedly a seasonally adjusted annual rate of 624,000, up 2.5 percent over the revised 609,000 May figure and 6.7 percent above the June 2010 estimate. 

Construction of single-family homes increased 9.4 percent last month, the largest jump since June 2009, when the recession ended. But economists cautioned that the annual pace of 453,000 homes is still too low to reflect a rooted improvement in the market. 

Work on multifamily homes, a volatile sector, such as townhouses and apartments, surged 30 percent to an annual rate of 176,000. It was up 100 percent from June 2010.

Regionally, home construction saw increases in across the country. 

The Northeast had the biggest surge, up 35.1 percent, while the Midwest saw 25.3 percent spike. The South had a 10.6 percent increase and the West was up 5.4 percent.

Builders are struggling to compete in a housing market where the sales of distressed homes represent a better deal for homebuyers.

Homebuilders’ confidence improved in July, rising 2 points to 15 as the future for home construction remains uncertain, the National Association of Home Builders said Monday. 

Despite the uncertain future, the index that shows sales expectations over the next six months increased by 7 points, returning to the level it reached in April. 

Any reading below 50 reflects negative sentiment about the housing market. The last time the index hit 50 was April 2006.

Many lawmakers argue that jobs won’t return until the housing market improves. Each new home creates an average of three jobs a year and about $90,000 in taxes, according to NAHB.

In May, new home sales fell to a seasonally adjusted annual rate of 319,000 homes, well below the 700,000 that represents a healthy market, according to the Commerce Department.