Home Construction Jumps 3.9% in June

Builders boosted construction of single-family homes by 3.9% nationally in June, the latest sign of what analysts are calling a mild recovery in the housing industry.

“This is the beginning of a modest improvement in single-family starts,” economist David Berson of the Federal National Mortgage Assn. said Wednesday. “The drop in interest rates . . . now is having an effect.”

David Lereah, an economist with the Mortgage Bankers Assn., agreed. “The housing market will not be robust any time soon, but it’s clear it has bottomed out,” he said.

However, volatile multifamily construction plunged, pulling overall housing starts down 0.1%, the fifth decline in six months.

“Multifamily starts are not likely to fall further, so total starts are likely to move up next month, particularly as the economy begins to pick up a little bit,” Berson said.

Starts overall totaled 1.263 million units at a seasonally adjusted annualized rate in June, down from 1.264 million in May, the Commerce Department said Wednesday. Construction was off in every region except the Midwest.

But the report also shows that construction was not as weak in April and May as previously thought. Starts rose 2.5% in April, rather than 0.4% as initially reported, and fell 0.4% in May, rather than 1.3% as originally estimated.

Single-family starts jumped to a 1.01-million annual rate in June, from 974,000 a month earlier, which had been the lowest rate since the 939,000 of March, 1993. The June rate was the highest since 1.05 million last March.

Single-family homes represent about 80% of total starts.

“Falling interest rates undoubtedly have improved buyer demand,” said David Seiders, an economist with the National Assn. of Home Builders.

Thirty-year, fixed-rate mortgages averaged 7.53% in June, down from more than 9% last January. They have continued to fall, hitting 7.41% last week, the lowest in 16 months.

But construction of apartments and condominiums fell 13.4% after surging 11.5% a month earlier.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Housing Starts

Seasonally adjusted annual rate, in millions of units:

June 1995: 1.26

Source: Commerce Department