Home construction up for 5th month in a row
Construction of US homes rises in July, giving the economy a boost
- On Tuesday August 18, 2009, 6:20 pm EDT
WASHINGTON (AP) — At least the market for new homes isn’t getting worse anymore, and that’s the first step to getting better.
In fact, the overall economy is actually getting a small boost as more buyers walk into model houses ready to sign contracts and builders hire workers to pour foundations and pave roads.
Construction of single-family homes rose in July for the fifth straight month, edging up almost 2 percent to the highest level since last October, the government said Tuesday. Building permits climbed nearly 6 percent.
Each new home built creates about three jobs on average and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.
With new construction up 37 percent from its low point this winter, the industry is expected to help the overall economy this quarter for the first time in three and a half years.
“Housing is no longer a drag,” said Mark Vitner, a senior economist with Wells Fargo. “That’s a good thing.”
Of course, the housing industry is coming back from the worst recession since the Great Depression, and construction is still more than 70 percent from its 2006 peak. So the impact from hiring and spending on materials like wood and concrete is modest.
In addition, hammers are silent at construction sites for apartment buildings. For developers, it makes little sense to build when there are so many vacant homes and condominiums for rent. Apartment construction fell 13 percent from June to July.
That pulled the combined construction rate for homes and apartments down 1 percent to a seasonally adjusted annual rate of 581,000 units, from 587,000 in June. Economists polled by Thomson Reuters expected 600,000.
There are still several threats to the recovery of the U.S. housing market.
The unemployment rate, now 9.4 percent, could surpass 10 percent, leaving more homeowners unable to pay their mortgages. Interest rates are still near historic lows but could rise, making homes less affordable. Foreclosures are still at record highs.
And July was the last month that most builders could start new homes and have first-time buyers qualify for a new tax credit. Buyers can save 10 percent on the price of a home, up to $8,000 in taxes, if they complete the purchase by the end of November.
Builders and real estate agents are pressing in Congress for that credit to be extended. If it isn’t, sales could easily slump again.
“I’m not seeing a tremendous amount of good news on the job or economic front, so I do think it’s important that the credit get extended,” said Richard Dugas Jr., CEO of Pulte Homes Inc.
More homebuyers also means more business to retailers like Home Depot Inc., which on Tuesday posted its first annual increase in quarterly sales transactions in five years. Better still, the retailer saw improvements in Florida and California, two of its most important — and troubled — markets.
Sales of new homes have posted monthly increases since April. The Commerce Department reports on July new home sales numbers Aug. 26. Sales are expected to rise roughly 2 percent, according to economists surveyed by Thomson Reuters.
AP Real Estate Writer Alex Veiga contributed to this report from Los Angeles. AP Retail Writer Mae Anderson contributed from New York.
Copyright © 2009 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press.
Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quote data delayed 15 minutes for Nasdaq, NYSE and Amex. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. All information provided “as is” for informational purposes only, not intended for trading purposes or advice. Yahoo! is not an investment adviser and does not provide, endorse or review any information or data contained herein.
