(A.P.) – Construction of new homes and apartments dipped slightly last month, missing expectations, in a sign that the building industry’s recovery from the housing bust is likely to be bumpy and gradual.
The Commerce Department said Tuesday that new construction fell 1 percent in July to a seasonally adjusted annual rate of 581,000 units, from an upwardly revised rate of 587,000 in June. Economists polled by Thomson Reuters expected a pace of 600,000 units.
The decline was led by a 13 percent drop in apartment building. Construction of single-family homes rose 1 percent to the highest level since October 2008 and the fifth-straight monthly increase.
Builders slammed the brakes on construction after the housing bubble burst, and in April housing starts plunged to the lowest point in a half-century. Then construction began a recovery, rising to the highest level in seven months in June before slipping again last month.
The industry is still a long way from non-recession levels. Housing starts last month were still nearly 38 percent below July last year.
Applications for building permits, an indicator of future activity, fell 1.8 percent to an annual rate of 560,000 units. Economists expected an annual rate of 580,000 units.
The industry is seeing increased demand from consumers who want to take advantage of a new federal tax credit for first-time homebuyers. It covers 10 percent of a home price up to $8,000. It is set to expire at the end of November.
While numerous signs have emerged that the U.S. housing market has stabilized after the worst housing recession since the Great Depression, there are several threats to any recovery.
The unemployment rate, now 9.4 percent, is expected to surpass 10 percent, leaving more homeowners unable to pay their mortgages. Interest rates are still at attractive levels but they could rise, making buying a home less affordable.
Nevertheless, builders have been growing more optimistic. The National Association of Home Builders said Monday its index of industry confidence rose in August to the highest level in more than a year.