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The latest housing starts depict a market that remains gridlocked by a glut of unsold homes and a weak economy. According to the Commerce Department, permits to build new homes in July fell 3.2 percent and the number of new homes being built slipped 1.5 percent. That's the bad news.
The good news is that the drop was less than analysts expected and, over the past year, housing starts are up 9.8 percent while building permits have increased 3.8 percent.
A brake on July's sliding numbers came from a demand for multifamily dwellings, as more homeowners are being replaced with renters. Housing starts in July for multifamily homes rose 7.8 percent, although permits for future construction dropped 10.2 percent, indicating lack of builder confidence that the need for new multifamily housing is long-term.
New construction stats are a closely watched indicator of the housing market because increased construction activity leads to jobs and consumer spending on big-ticket items like appliances and home furnishings.
Not surprisingly, builders are glum. On Monday, the National Association of Home Builders, or NAHB, said its survey of builder sentiment remains at historic lows. The NAHB/Wells Fargo Housing Market Index indicates that builders are stymied by the amount of distressed properties on the market, the high unemployment rate and tight lending standards that depress demand, even though mortgage rates and prices are low. Forty-one percent of the builders in the survey said they were unable to close a new sale because the homeowner couldn't sell his or her current residence.
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