US housing construction gains in July but only for apartments

17 August 2010 14:34  [Source: ICIS news]

WASHINGTON (ICIS)--US new home construction rose slightly in July compared with June, the Commerce Department said on Tuesday, but the 1.7% advance was due solely to apartment developments while the core single-family housing sector fell by 4.2%.

In addition, the department’s monthly report on housing construction indicated that there is no near-term prospect for improvement, with the number of building permits issued in July down by 3.1% from June.

Privately owned housing starts in July were at a seasonally adjusted annual rate of 546,000, the department said, up by 1.7% from the June figure of 537,000, which was revised downward from the initial estimate of 549,000 units.

But July’s new home construction pace was down by 7% compared with the same month a year ago when work began on 587,000 housing units.

Within the overall figures, construction work on multi-unit apartment buildings rose by 17.3% in July from June, in sharp contrast to the 4.2% fall in single-family housing starts.

The gains in apartment building construction are seen as an indicator of continuing stress in the housing sector because demand for rental apartments increases as more owners lose their homes to foreclosure. That in turn means there are more vacant existing homes on the market to compete with new construction.

The recent sharp decline in US home construction - especially in the core single-family sector - was expected after the year-long federal tax credit programme for home buyers expired at the end of April.

In May, housing construction plummeted 10%, and activity fell by 5% in June.

While the post-stimulus fall was anticipated, the continuing decline in single-family home construction raises doubts about a housing sector recovery amid ongoing weak demand.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives, roofing materials and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new home built represents some $16,000 (€12,480) worth of chemicals and derivatives used in the structure or in production of component materials.

The number of building permits issued in July was at a seasonally adjusted annual rate of 565,000, the department said, a decline of 3.1% from the June figure of 583,000, which also was a downward revision from the earlier 586,000 estimate.

Building permits are issued by local governments when contractors are ready to break ground and begin construction of a residential structure, so monthly permitting data are seen as a real-time indicator of the housing sector’s near-term prospects.

US Housing Starts

	July ‘10	June ‘10	June-July ‘10	July ‘09	July ’09 to July ‘10
US Housing Starts	546,000*	537,000*	1.7%	587,000	- 7.0%

* Seasonally adjusted & annualised

($1 = €0.78)

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