Housing Starts Rise to Highest Since ’86

U.S. home builders cranked up construction to a 17-year high in July as rising mortgage rates prompted consumers to buy sooner rather than later, a report showed Tuesday, offering the latest sign of the economy’s brightening outlook.

In a separate report, the University of Michigan’s confidence survey showed that consumer sentiment dipped in the first half of August as Americans remained worried about job security. Sentiment, however, has essentially remained flat for three months after bouncing back from lows before the Iraq war.

In another report, weekly sales at chain stores stayed brisk, suggesting retail sales could be strong this month.

Not only did home builders break ground at breakneck speed in July, but housing starts for May and June also were revised up. That means overall economic growth for the second quarter might be revised higher.

The Commerce Department said housing starts rose 1.5% in July to a seasonally adjusted 1.872-million annual rate, the highest since 1986 and easily beating forecasts for a dip to a 1.793-million rate.

Starts of single-family homes came in at a 1.521-million annual rate, the highest level since November 1978. The figures came on the heels of another report showing confidence among home builders hitting its highest point in 3 1/2 years in August.

A sharp 1-percentage-point jump in 30-year mortgage rates since June has prompted a wave of Americans to buy homes before rates head even higher.

The July report included one cautionary sign. Permits for new homes, an indicator of future building, fell 2.4% to a 1.78-million annual pace.

The University of Michigan said its preliminary index of sentiment for August dipped to 90.2 from 90.9, contrary to forecasts of a rise to 91. Survey respondents also increased their expectations for inflation in the next year to 2.3% from 1.7%.

Last week’s blackout apparently failed to keep shoppers out of stores. Sales at major chains climbed 3.3% in the week ended Saturday compared with a year earlier, Instinet Research said in its weekly Redbook report.

Orders to U.S. factories for durable goods rose 2.3% in June, less than the 2.6% previously reported, the Commerce Department said. Orders were unchanged in May, revised from a gain of 0.1%.

Reuters and Bloomberg News were used in compiling this report.