WASHINGTON — Home construction increased last month and applications for building permits also grew. But the gains were driven mainly by apartment and condominium construction, not the much larger single family-homes sector.
Construction of new homes and apartments rose 10.5 percent in August from a month earlier to a seasonally adjusted annual rate of 598,000, the Commerce Department said Tuesday. That’s the highest level since April.
“The housing market has found a bottom, and we’re bouncing along here,” said Thomas Simons, an economist at Jefferies Group Inc. in New York. “The market is challenged by supply, and until that is cleared out, it will be tough for the homebuilders. We also need additional job creation.”
Pulling the figures up was a 32 percent monthly increase in the condominium and apartment market, a small portion of the market. Single-family homes, which represent about 80 percent of the market, grew more than 4 percent.
“Even though single-family starts moved in the right direction, there is still weakness evident in the single family data,” Daniel Silver,an economist at JPMorgan Chase in New York, said in a note to clients. “The level of starts relative to permits indicates that the growth in housing starts may not be sustained.”
Housing starts are up 25 percent from their bottom in April 2009 but are still down 74 percent from their peak in January 2006.
Building-permit applications, a sign of future activity, grew by nearly 2 percent to an annual rate of 569,000.
Builders are struggling with weak demand for new homes caused by high unemployment and a glut of foreclosed homes on the market. They had benefited in the spring from federal tax credits, but those expired in April.
Lennar Corp., a major builder based in Miami, said Monday that the number of buyers signing agreements to purchase its homes fell 15 percent from a year ago in the three months that ended August 31.
“It’s been a tough summer,” said Stuart Miller, Lennar’s chief executive, on a conference call with investors Monday. “As we’ve gone into September, we’re seeing a little bit of pickup in our traffic, but that shouldn’t be cause to have a sigh of relief at this point.”
Construction activity rose 34 percent in the West and was up 22 percent in the Midwest and 7 percent in the South. However, construction fell by 24 percent in the Northeast.
On Monday, the National Association of Home Builders said its monthly index of builders’ sentiment was unchanged in September at 13. The index has now been at the lowest level since March 2009 for two straight months.
Information for this article was contributed by Courtney Schlisserman and Bob Willis of Bloomberg News.
Business, Pages 25 on 09/22/2010