WASHINGTON – Led by increased apartment construction, housing starts grew 2.3 percent in June to an annual rate of 1.47 million, according to a Commerce Department report today. But a 7.5-percent drop in building permits to an annual rate of 1.41 million, the lowest level in a decade, portends a continuing slowdown the housing market.
“We’re seeing ongoing softness in the housing data,” James Shugg, senior economist at Westpac Banking Corp. in London told Bloomberg News.
Even though builders continue to lower prices and add incentives to boost buying, rising mortgage rates and stricter lending rules are holding back the market. Combined with a glut of unsold properties, the housing sector will continue to drag down construction and the overall economy for the rest of the year, economists told Bloomberg News.
In fact, residential investment has subtracted from economic growth every quarter since the last three months of 2005. Spending on home-construction projects fell at a 16-percent annual rate last quarter and subtracted 0.9 percentage point from growth.
Home Depot Inc., the world’s largest home-improvement retailer, last week cut its forecast for annual profit. Chief Financial Officer Carol Tome said in an interview with Bloomberg News that housing is likely to remain weak.
“No news is coming to our attention that is giving us any comfort that there’ll be a recovery this year,” Tome said.
