WASHINGTON (AP) — U.S. home construction fell in June to the slowest pace in nine months, a setback to hopes that housing is regaining momentum and will boost economic growth this year.
Construction fell 9.3 percent last month to a seasonally adjusted annual rate of 893,000 homes, the Commerce Department said Thursday. That was the slowest pace since last September and followed a 7.3 percent drop in May, a decline even worse than initially reported.
Applications for building permits, considered a good indicator of future activity, were also down in June, dropping 4.2 percent to a rate of 963,000 after a 5.1 percent decline in May.
The worse-than-expected June performance reflected a big drop in activity in the South, where construction plunged by 29.6 percent last month.
Analysts, however, said that the June decline in construction may have been influenced by temporary factors such as heavy rain in parts of the South which could have held back housing starts in that region.
Jennifer Lee, senior economist at BMO, said it was too soon to conclude that the housing recovery has stalled. "After all, job growth continues, mortgage rates are near their lows for 2014 and homebuilder confidence has been increasing," she said in a research note.
The overall weakness reflected a 9 percent fall in construction of single-family homes, the biggest part of the market, and a 9.9 percent drop in construction of apartments and other multi-family units.
All of the June weakness was confined to the South, where about 40 percent of home construction occurs. Construction was up 14.1 percent in the Northeast, 28.1 percent in the Midwest and 2.6 percent in the West.
Home construction has struggled to gain traction this year, limiting its ability to contribute to economic growth. Part of the weakness reflected an unusually severe winter which hampered construction. But rising home prices, a rise in mortgage rates from historically low levels and tighter lending standards imposed since the financial crisis have also been a barrier, especially for potential first-time buyers.
Continue reading this story on the...