New residential construction drops in June

New residential construction dropped in June, another indication that the U.S. housing market is struggling.

Housing starts fell 5% in June from May, to a seasonally adjusted annual rate of 549,000, the Commerce Department reported Tuesday. That was 5.8% below the June 2009 rate.

Single-family home construction fell 0.7% in June from May, and construction of apartment buildings dropped nearly 20%.

“The housing industry remains stuck in a rut, with both sales and construction activity moribund,” said Michael D. Larson, an interest rate analyst with Weiss Research. “Builders simply lack the confidence — or in some cases, the financing — to ramp up construction, especially in the wake of the home buyer tax credit’s expiration.”

The poor report for housing starts follows news Monday that builder confidence in the new home market sank to its lowest level in more than a year, according to an industry index. Home sales plunged 33% in May, the latest sales figures released, and many economists expect a difficult year for builders now that the federal tax credit for buyers has expired.

Another indicator of future activity released by the government Tuesday, building permits, showed a 2.1% increase in June over May to a seasonally adjusted annual rate of 586,000. But that was 2.3% below the June 2009 estimate.

Permits for single-family homes dropped 3.4% in June from May to a seasonally adjusted annual rate of 421,000, and will probably drop again in July, said Patrick Newport, U.S. economist for IHS Global Insight.

“The key for housing going forward is job growth,” Newport said.