The housing sector plays the thorn in the lion’s paw of the U.S. economy. After two consecutive months of increases, the residential construction numbers released by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD) showed that building permits for July had receded 1.8% from June to 560,000. After the rapid fall during the final six months of 2008, the most recent numbers are 39.4% lower than the 924,000 permits estimated in July of last year.
Housing starts were also down from June, easing lower 1% from 587,000 to 581,000 in July. And of course, providing a barometer for the economic devastation that has taken place over the past 12 months, those figures were more than 37% below the 933,000 starts seen in July 2008. On a positive note, single-family housing starts were up 1.7% to 490,000, the fifth straight month with an increase. But single-family home completions fell 4.1% to 491,000, continuing its teeter-tottering trend.
Even though the July figures showed declines, they are still on the top side of the bottom hit in April.
“Monthly data for housing activity are volatile, but today’s nominal decline stands as a reminder that the economy is still fragile,” stated U.S. Secretary of Commerce for Economic Affairs Rebecca Blank. “Looking at the big picture, we are confident that we’ve created the stability necessary to turn things around.”
Sticking toward the cheery side of the numbers, the Commerce Department points out that following the plunge down the backside of the bell curve that took place in the sector between April 2005 and April 2009 where total permits plummeted 78%, total permits have risen 12.4% during the last three months. Total housing starts have also increased more than 21%, after a near-fatal tumble of 78.9% from a peak in January 2006 to the lows seen in April 2009.
Though there may be buds, the roses aren’t yet fully in bloom. During the last 12 months, the construction sector as a whole has lost more than one million positions. The construction industry is trying to cope with an unemployment rate of 18.2%, almost double that of the nation’s average. And according to the Federal Reserve Board, U.S. banks are reporting total real estate loans have set a new record with a delinquency rate of 8.27%, while residential loans have hit a new high-water mark of their own with a delinquency rate of 8.84%, nearly a full percentage point higher than what was seen in the first quarter of this year. Charge-off rates have increased to new peaks as well, with banks reporting total real estate loans in the second quarter hit a charge-off rate of 2.17% and residential real estate loans hit a rate of 2.34%.
Nonetheless, the government and the markets are becoming more optimistic that recovery is well underway. Blank stressed what has become the Commerce Department’s company line over the past week of economic indicator releases, saying, “As we double Recovery Act spending in the second half of the year, and with every new project we start, we are one step closer to getting there.”
Matthew Carr, NACM staff writer. Follow us on Twitter @NACM_National