US Housing Starts Cool 2.5 Percent In July

Wednesday, August 16, 2006

Aug. 16 — Starts in new-home construction dropped 2.5 percent in July, according to figures released by the Commerce Department today, continuing the orderly cool down of the housing market. Housing starts declined to a seasonally adjusted annual rate of 1.795 million units. This was 13.3 percent below the peak pace of a year ago when activity in the housing market was operating at unsustainable levels.

Single-family housing starts were down 2.3 percent for the month to a pace of 1.452 million units, a 16.6 percent drop from the July 2005 pace. Multifamily housing construction was down 3.4 percent for the month to a seasonally adjusted pace of 343,000 units.

"The moderate decline in starts was anticipated and shows that builders are adjusting to changing market conditions," said David Pressly, president of the National Association of Home Builders (NAHB) and a home builder from Statesville, N.C. "The drop in permits shows that builders are not planning to start as many homes in the near future, and many are offering incentives to prospective buyers in order to control their current inventory positions."

"Housing demand has been weakening as affordability has deteriorated and investors/ speculators have pulled out of the market, and builders are adjusting their production levels accordingly," said NAHB Chief Economist David Seiders. "Builders also are offering a variety of incentives to bolster sales and limit sales cancellations as inventories have climbed."

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