American Home-building hits Eight-month High in July

US residential construction rebounded in July, growing 15.7 percent, the fastest pace in eight months and offering hope of regained momentum in the sector after two months of declines.

The Commerce Department announced that construction hit a seasonally adjusted annual rate of 1.09 million homes, the fastest pace since November, following declines of four percent in June (945,000) and 7.4 percent in May.

Applications for building permits, considered a good sign of future activity, also advanced 8.1 percent to an annual rate of 1.05 million, after declines of 3.1 percent in June and 5.1 percent in May.

The July rebound reflected strength in single-family home construction- up 8.3 percent- and apartment construction, which rose 33 percent.

July’s strong performance was led by a 44 percent rise in construction starts in the Northeast. Housing construction was up 29 percent in the South, recovering from a fall of 26.8 percent the previous month which has been attributed to heavy rain in the region. Sales rose 18.6 percent in the West but fell 24.8 percent in the Midwest.

Economists were surprised by July’s performance and June was revised significantly higher: from a 9.3 percent decline to just a 3.9 percent drop.

Sal Guatieri, Senior Economist at BMO Capital Markets, said solid job growth and a recent decline in mortgage rates had helped boost construction, however added that weak wage growth and tight lending standards were still depressing activity, particularly among first-time buyers.

Americans, unable to afford to buy new homes, are renting more, showing that the country’s economy continues to struggle as it emerges from the financial crisis. Economists estimate that in a normally-functioning economy, the US would be building about 1.7 million new homes a year.