Fewer Homes for Builders in June

24 July 2013

Builders in the country started fewer constructions in June, especially on the rental sector. Still, applications for single-family home construction reached their highest in five years.

A seasonally adjusted annual rate of construction of 836,000 was reported in June. In contrast, May experienced 928,000 constructions. June levels were approximately 10 percent lower than in May and were also the lowest since August of 2012. Apartment constructions took the biggest hit, falling 27 percent in June from the previous month.

Despite the recent lows in construction, however, applications for constructing single-family homes rose to 624,000. This was the highest since 2008. The total permit applications, however, still fell to 911,000 in June from 985,000 in May.

The trend in construction suggests a significant slowdown in activity but doesn’t seem to pose any threat in the overall recovery of the housing market. The increase in applications for single-family homes suggest a strong confidence in the sector, reflecting good demand and sales conditions for the single-family home market.

The country’s economic recovery has been driven in part by the strong performance of the real estate market. But with the recent mortgage increase, many are now worried that the recovery could suffer some sort of damage. Increase in home sale prices, however, suggest otherwise. These means that there is still a lot of confidence in the housing market and its recovery is not going to lose any of its gathered momentum any time soon.

One of the greater impacts of low construction activity is in the employment sector. Although construction of new homes represents a relatively small part of the entire housing market, each new construction generates an average of three jobs and significant tax revenue.