Housing starts expected to post small gain in July but remain at depressed levels

Ahead of the Bell: Housing starts

WASHINGTON — Housing construction likely will show a small gain in July following a big decline the previous month.

Economists surveyed by Thomson Reuters expect construction of new homes and apartments to have climbed to a seasonally adjusted annual rate of 560,000 in July. The report will be released by the Commerce Department at 8:30 a.m. EDT Tuesday.

The expected 2 percent gain in July housing construction would follow a big drop in construction in June that pushed total activity down to an annual rate of 549,000 units, the slowest pace since last October.

The sluggish nature of the housing recovery has acted to depress the rebound of the overall economy, which has lost momentum since the start of the year.

The big drop in June housing construction was driven by a 20 percent plunge in condominium and apartment construction, a small but volatile portion of the housing market.

Construction of single-family homes, the largest part of the market, was essentially flat in June.

Economists are looking for applications for building permits, considered a good barometer of future activity, to fall further in July, dipping 0.5 percent to a seasonally adjusted annual rate of 580,000 units.

In advance of the report on housing starts, the National Association of Home Builders reported Monday that its monthly index of builder sentiment dropped to 13 in August, the lowest reading in 17 months.

Readings below 50 indicate negative sentiment about the housing market. The last time builders’ index was above 50 was in April 2006.

The housing market continues to struggle because jobs are scarce with unemployment continuing to hover near double-digit levels. The jobless rate remained stuck at 9.5 percent in July.

Builders say that consumers remain worried about the weak economic recovery and the sluggish jobs market. Among those who are buying, many are opting for deeply discounted foreclosed properties.

The housing industry received a boost in the spring when the federal government offered tax credits of up to $8,000 to encourage home sales. But those credits expired at the end of April and the housing market has struggled since that time.