Housing Starts Rose 14% in June

The pace of new construction of private homes in the United States last month was the highest since January, according to government figures released on Tuesday, but economists warned that the sector had still not stabilized for a full recovery.

Builders broke ground at a seasonally adjusted annual rate of 629,000 units in June, a rise of more than 14 percent compared with the previous month and a rate that was 16.7 percent higher than June 2010, the Department of Commerce reported.

It was the highest since January, when construction starts came in at a 636,000-unit annual rate.

The numbers are used as an indicator of future economic activity because of their implications for consumer spending, hiring, housing inventory, prices and other factors.

But the data is also volatile, subject to seasonal and other influences. A report on the statistics from Capital Economics economists said that the June survey reflected the wake of severe weather in the previous months.

Last month’s increase “is not the start of a significant and sustained surge in homebuilding,” the report said. “Instead, it reflects a rebound in activity after the unusually severe tornados and floods depressed starts in both April and May.”

The rate for construction starts on single-family homes was 453,000 in June, up 9.3 percent from May, while the rate for buildings with five units or more was 170,000, up 31.8 percent, the report said.

The report also said that permits for new construction, an indicator of future activity, rose by 2.5 percent from May to a seasonally adjusted rate of 624,000 in June. It was up 6.7 percent compared with June 2010.

Within that category, permits for multifamily units rose 6.9 percent to a 217,000 annual rate, the highest level since October 2008. The category was up in the South, West and Midwest, but down in the Northeast.

“For once in a long time, there was some good news in this report,” said Patrick Newport, an economist at IHS Global Insight. “The market for multifamily homes is coming back to life — very slowly — but the foundations are in place.

“But this is partly because the single-family market is falling so badly people are inclined to rent,” he added.

The survey also showed that completion of new homes took place at a rate of 535,000, which was 1.7 percent higher than in May. With a glut of new homes already on the market, adding to the inventory would tend to dampen prices, economists said.

“The addition of new supply to the housing market isn’t really constructive insofar as housing prices are concerned, but any uptick in new-home construction should offer some relief on the employment front,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company, in a research note.

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