New home construction rises, but outlook weakens

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- New home construction ticked higher in July, but indications of future building were weak, the government said Tuesday.

Housing starts rose 1.7% from June to a seasonally adjusted annual rate of 546,000 last month, the Commerce Department said.

Economists were expecting housing starts to rise to 555,000, according to a consensus estimate from Briefing.com.

On a year-over-year basis, starts fell 7% from July 2009.

"Activity in the housing market is likely to remain depressed for several years," Paul Ashworth, U.S. economist at Capital Economics, said in a research note. "Housing is not going to lead the economic recovery."

Future activity: Applications for building permits, a gauge of future construction activity, fell over the month. Permits dropped to a seasonally adjusted annual rate of 565,000 in July, down 3.1% from a revised 583,000 in June.

Economists were expecting a more modest drop to 573,000. Permits were down 3.7% from the same time last year.

"[The permits figure] is not an encouraging sign," Ashworth said. "The 'good' news, however, is that housing is so depressed it is hard to see activity falling much further from such a severely depressed level."

New homes by sector: New construction of single-family homes, the key sector of the housing market, fell 1.2% over the month to an annual rate of 421,000.

The annual rate for new construction of multi-family homes - buildings with 5 or more units - was 129,000. To top of page