Posted by Marcelo Perez

New residential construction surged in the latest month, as the nation’s homebuilders gained confidence that the worst is over. Housing starts for June jumped 3.6%, to a seasonally-adjusted annual rate of 582,000, the fastest pace since November of last year. The report was somewhat of a pleasant surprise, as a number closer to 531,000 annualized units was expected. In the last year, however, housing starts have fallen by over 46%, down from a 1,107,000 annual rate in June 2008. In all of 2007, that number was 1.355 million. In 2006,  it was 1.8 million.

Building permits, an indicator of future construction, rose by 8.7%, to 563,000 annualized units. It was the strongest reading since December. Permits for single-family homes, considered by many analysts as the most important figure in the report, surged 5.9% to 430,000. Building permits are still down 52% in the past year, though.

After seeing plunging starts and record lows over the first few months of the year, we may have finally turned the corner in the housing market. Inventories continue to fall and sales are rising in the bubble states. Even though starts have increased for two straight months, I don’t think we can call this a trend - yet. Regardless, the report is still a positive, and a further increase in July could solidify the recovery argument.

New construction on single-family homes rose by 14.4% for the month, to an annualized rate of 470,000. Over the past year, single-family starts are down a little over 28%.

Construction on buildings with 5 units or more continued to fall, this time by an astonishing 25.8%, and are down a record 74.8% in the past year.

Regionally, total starts surged 28.6% in the Northeast and 33.3% in the Midwest. Starts in the South and the West both fell by 1.4% and 14.8%, respectively continuing a trend I mentioned last month. Most of the excess inventory is located in a few states like Florida, Nevada and Arizona. New building in those states will likely lag the national trend.

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