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Housing Starts Fall 5.3% in June

Rate of groundbreaking resumes its decline after a brief rebound in May. `Builders are in full retreat,' an analyst says.

July 20, 2006|From Reuters

WASHINGTON — Groundbreaking for homes resumed its decline in June, as single-family housing starts fell to their slowest pace in 1 1/2 years, with a sharp plunge in the Northeast, a government report showed Wednesday.

The Commerce Department said June housing starts fell 5.3% in June to a 1.85-million-unit annual pace, from a downwardly revised 1.953-million-unit pace in May. The rise in May, driven partly by an unexpected jump in multifamily housing starts, interrupted three straight monthly declines.

June housing starts fell short of the expectations of economists, who had projected a pace of 1.9 million units, down from May's originally reported 1.957-million-unit pace.

The Northeast had the sharpest declines, with single-family housing starts in the region plunging 32.8% to a 92,000-unit annual pace in June, registering their biggest monthly drop since March 1984 and the slowest annual pace since January 1996.

In the nation as a whole, permits for future groundbreaking, an indicator of builder confidence, fell 4.3% in June to a 1.862-million-unit pace, the slowest since May 2003. Economists polled by Reuters expected June permits to fall to 1.92-million units after an upwardly revised 1.946-million units, originally reported as 1.932 million.

"The slowdown in the housing market may be orderly, but it is significant nonetheless," said Joel Naroff, president of Naroff Economic Advisers in Holland, Pa. "Housing starts tumbled in June and builders are in full retreat."

Total Northeast housing starts fell 11.5% in June, but permits rose 6.1%, driven by multifamily housing plans. In the West, total housing starts fell 10.2%, with single-family starts down 5.9% and permits down 7.6%. June housing starts in the South fell 4%, while permits fell 5.3%. In the Midwest, June housing starts rose 3%, but permits fell 1.6%.

The Mortgage Bankers Assn. on Wednesday reported that mortgage applications fell last week for the first time in three weeks, largely reflecting a steep decline in home purchase loans even as mortgage rates dropped.

The association said its seasonally adjusted index of mortgage application activity for the week ended Friday decreased 4.6% to 540.8 from the previous week's 566.8.

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