New construction of single-family homes fell 5.3% to a fresh 17-year low in June, while a change in building permit rules for multifamily units in New York City pushed up total starts by 9.1%, the Commerce Department reported Thursday.
A flood of multifamily building permits was filed in New York ahead of the new rules, skewing the overall data for last month for both building permits and housing starts.
Excluding multifamily starts in the Northeast, housing starts fell 4%, the government said. The new construction code affected only multifamily construction in New York City.
Including the New York apartments and condominiums, total starts rose 9.1% to a seasonally adjusted annual rate of 1.066 million.
Outside of June's quirky data, there are no signs of recovery in the home-building industry: Builders are cutting back on production in an attempt to bring supply back into balance with falling demand.
"With credit tightening and employment growth slowing, a recovery in housing activity remains remote," wrote Gary Bigg, an economist for Bank of America.
In the key single-family segment, starts and permits have fallen to the second-lowest levels in 26 years.
Starts this year almost surely will fall below the 1 million mark for the first time since World War II, said Patrick Newport, an economist for Global Insight.
Economists, apparently unaware of the impact of the new rules, had expected June's starts to fall about 2%, to an annualized rate of 959,000.
See Economic Calendar. "The city may never sleep, but many analysts, including us, were caught asleep at the switch," wrote Richard Moody, chief economist for Mission Residential in Austin, Texas.
During June, starts of single-family homes dropped 5.3% to a seasonally adjusted annual rate of 647,000, the lowest in 17 years.
Meanwhile, building permits rose 11.6% to a seasonally adjusted annual rate of 1.09 million, boosted by the new regulations. Excluding multifamily units in the Northeast, building permits -- considered a forward-looking indicator of the state of the construction market -- rose 0.7%, the government said. Permits for single-family homes fell 3.5% to the second lowest level in 26 years.
Bleak backdrop
The National Association of Home Builders reported Wednesday that builders' sentiment was the weakest in the 23-year history of its survey. Builders said potential buyers were sitting on the sidelines, waiting for prices to bottom.
See full story. In the past year, total housing starts are down 27%. Single-family starts are down 43%.
Building permits are down 24% in the past year, while single-family permits are down 40%.
The government cautions that monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased.
In June, for instance, the standard error for starts was plus or minus 10.3%. Large revisions are common.
It can take four months for a new trend in housing starts to emerge from the data. In the past four months, housing starts have averaged 1.01 million on an annualized basis, down from 1.02 million starts in the four months running through May.
In a separate report Thursday, the Labor Department said first-time filings for jobless benefits rose 18,000 to 366,000 last week. The number of people collecting unemployment benefits fell by 81,000 to 3.12 million.
See full story. Also, the Federal Reserve Bank of Philadelphia said its manufacturing sentiment index was negative for the eighth straight month, while a key gauge of inflation rose to its highest level since 1980.
See full story. Details of housing report
Starts of multifamily units rose 42.5% in June, the Commerce Department's data showed.
Regionally, starts surged 103% in the Northeast and nudged 0.4% higher in the South, but they fell by 11% in the Midwest and by 8.2% in the West.
Meanwhile, housing completions rose 1.2% in June to a seasonally adjusted annual rate of 1.17 million. Builders, trying to work off their excess inventories, still have too many homes in the pipeline for the number of sales.
