Housing starts, building permits jump in June

WASHINGTON -- Construction of new homes rose in June to the highest level in seven months, a sign builders are starting to regain confidence as they emerge from the housing bust.

The Commerce Department said Friday that construction of new homes and apartments jumped 3.6% last month to a seasonally adjusted annual rate of 582,000 units, from an upwardly revised rate of 562,000 in May.

That was better than the 530,000-unit pace economists expected, and the second straight increase after April's record low of 479,000 units.

In another encouraging sign, applications for building permits, seen as a good indicator of future activity, rose 8.7% in June to an annual rate of 563,000 units. Economists polled by Reuters expected an annual rate of 520,000 units.

The jump in housing starts reflected a more than 14% rise in construction of single-family homes.

Over the past three years, the collapse in the housing market led to soaring loan losses, a severe banking system crisis and the longest recession since World War II. Even with the better-than-expected figures, analysts don't expect a quick rebound in housing. That's because the economy is still shedding jobs and home prices are falling, making people hesitant to commit to buying a new home.

The National Association of Home Builders said Thursday that its housing market index rose two points to 17 in July, the highest level in nearly a year. Readings below 50 indicate negative sentiment about the market. The last time it was above 50 was April 2006.

While housing normally leads the economy out of a recession, a glut of unsold homes and a record wave of mortgage foreclosures dumping more properties on the market is expected to temper demand. Despite the rise in housing construction for June, activity was still 46% below the year-ago level.