WASHINGTON — Construction of single-family homes rose 1 percent in July, the fifth-straight monthly increase as builders poured foundations at the fastest pace since last October, the Commerce Department said Tuesday.
While single-family home construction is still 73 percent below the frenzied peak in November 2005, it is up 37 percent from the bottom hit last winter. Builders say they are seeing more homebuyers walk through the door, ready to sign contracts. The confidence level of builders is the highest this month than its been in more than a year, the National Association of Home Builders said Monday.
"It's the general trend that matters and with housing, the direction is up." wrote Joel Naroff, president of Naroff Economic Advisors.
Construction of apartment buildings, however, tumbled 13 percent in July. That dragged the combined figure for homes and apartments down 1 percent to a seasonally adjusted annual rate of 581,000 units, from an upwardly revised rate of 587,000 in June. Economists polled by Thomson Reuters expected a pace of 600,000 units.
And though the worst of the housing market bust is likely over, builders are ramping up production cautiously because the market is still flooded with deeply discounted foreclosures.
Applications for building permits for homes and apartments — an indicator of future activity — fell almost 2 percent to an annual rate of 560,000 units. Economists expected an annual rate of 580,000 units.
The industry is seeing increased demand from consumers who want to take advantage of a new federal tax credit for first-time homebuyers. It covers 10 percent of a home price up to $8,000. It is set to expire at the end of November.
While numerous signs have emerged that the U.S. housing market has stabilized after the worst housing recession since the Great Depression, there are several threats to any recovery.
The unemployment rate, now 9.4 percent, is expected to surpass 10 percent, leaving more homeowners unable to pay their mortgages. Interest rates are still at attractive levels but they could rise, making buying a home less affordable. Foreclosures are still at record-high levels.