June Housing Starts Up 1.3%, but Clouds Loom

Builders quickened the pace of home construction in June, according to government data released Wednesday, but some analysts say there are signs that high mortgage rates will cause them to tap on the brakes.

“It won’t be a slump, but we won’t have the breakneck pace we saw during the first half of the year,” predicted Eileen Neely, an economist at the Federal National Mortgage Assn. “One indication of a slowdown already is showing up in [declining building] permits.”

But in June, housing starts rose 1.3% to 1.48 million at a seasonally adjusted annual rate, higher than the 1.45-million rate many analysts had expected. Single-family construction--80% of total starts--reached a two-year high.

And starts in April and May were even stronger than originally estimated. They totaled 1.51 million in April, rather than 1.5 million, and 1.46 million in May, rather than 1.43 million.

The picture in June was mixed, however. While overall starts were up in the West and South, they slipped in the Northeast and Midwest. And the volatile multifamily sector posted a double-digit decline.

Many analysts expect housing starts to begin to slow this summer as mortgage rates continue to rise.

“We may start to see the numbers come down a bit in July and August, but not a lot,” predicted economist David Lereah of the Mortgage Bankers Assn. “This is a healthy housing market.”