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What Soaring Confidence? Builders Cut Back in June

Despite soaring builder confidence, new housing permits and starts fell in June, with new construction falling to the lowest level in 10 months, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrc/pdf/newresconst_201306.pdf reported Wednesday.

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The seasonally adjusted annual rate of new housing permits tumbled 7.5 percent--the largest month-over-month decline since January 2011--while starts fell 9.9 percent, the second-largest drop since February 2011; starts fell 15.2 percent in April of this year.

Economists had expected builders to break ground on new homes at the rate of 951,000 instead of the reported 836,000, the lowest level since last August. Forecasts also predicted permits at a seasonally adjusted annual rate of 990,000 instead of the reported 911,000.

The government report came just one day after the National Association of Home Builders reported its Housing Market Index, a statistical measure of builder confidence, ""rose six points"":http://dsnews.comarticles/builder-confidence-surges-again-in-july-2013-07-16 in July after a seven-point increase in June, putting it above 50 for the second straight month. A reading of 50 or more is said to be a positive for builder confidence.

Builders apparently didn't ""walk the walk,"" as measured by actual activity.

Offsetting the unexpected June drop in residential construction data, the report of May starts was revised up to 928,000 from the originally reported 914,000, and the report of new permits in May rose to 985,000, up from the originally reported 974,000.

Builders completed homes at an annual adjusted pace of 755,000 in June, 6.3 percent more than May's 710,000. The May total was revised up from the initially reported 690,000 pace of completions.

Single-family starts fell in June to a pace of 591,000, 0.8 percent below May and the lowest level since March. Permits for new single-family construction rose 0.6 percent to a pace of 624,000, the highest level since May 2008.

One of the few positive signs in Wednesday's report was a sharp increase in the share of single-family permits, 68.5 percent--up from 62.9 percent in May. The June single-family share was the largest since September 2011, far exceeding the average 63.3 percent share of the intervening 20 months. However, the increase in the single-family share of permits was more reflective of a drop in multifamily permits (down 78,000 in June following a 26,000 decline in May) than an industry shift.

In the last 12 months, single-family permits averaged 63.2 percent of total permits, down from 64.8 percent in the 12 months ending June 2012 and 70.3 percent in the 12 months ending June 2011.

Starts also reflected an increase in the single-family share to 70.7 percent in June--the largest since last August. The share of single-family starts has averaged 67.7 percent in the last 12 months, down from 69.3 percent in the 12 months ended June 2012 and 75.2 percent in the 12 months ended June 2011.

Builders, according to the Census/HUD report, completed single-family homes at an annual rate of 554,000 in June, down 1.1 percent from the 560,000 pace in May. May completions exceeded the sales rate by 84,000, adding to the inventory of new homes for sale. June sales data will be released July 24.

The pace of total starts fell in June in all four Census regions, led by a drop of 58,000 in the South to 424,000. The pace of starts declined 13,000 in the Northeast to 94,000; 11,000 in the West to 192,000; and 10,000 in the Midwest to 126,000. Single-family construction picked up in three regions, increasing by 5,000 in the West to 131,000; by 2,000 in the Midwest to 93,000; and by 1,000 in the Northeast to 48,000. Single-family start activity fell 13,000 in the South to 319,000.

The annualized rate of all permits authorized rose 6,000 in the Northeast to 107,000 but fell 57,000 in the South to 453,000; 16,000 in the West to 205,000; and 7,000 in the Midwest to 146,000. The annualized rate of single-family permits rose in three Census regions, up 3,000 in the West to 137,000; 2,000 in the Midwest to 103,000; and 1,000 in the Northeast to 53,000. The rate of single-family permit activity dropped 2,000 in the South to 331,000.

_Hear Mark Lieberman every Friday on P.O.T.U.S. Radio, Sirius-XM 124, at 6:20 a.m. Eastern._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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