US housing starts expected to increase in June after slipping in May

Industrials Associated Press

The Commerce Department reports on June U.S. home construction Friday at 8:30 a.m. Eastern.

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HOUSING STARTS RISE: Economists believe housing starts last month rose 7 percent to a seasonally adjusted annual rate of 1.1 million, according to a survey by data firm FactSet. That increase would reverse much of the drop in May that had followed a surge of construction in April.

CONSTRUCTION SECTOR HEALS: What had been a sluggish construction sector has been running on adrenaline in recent months. Rising mortgage rates have spurred buyers to finalize deals, just as strong job growth and a rebounding economy have increased the number of would-be buyers in the hunt for a home.

Over the past 12 months, employers have added 2.9 million jobs, which means there are nearly 3 million more people with paychecks to spend across the broader economy. The impact of those job gains and the unemployment rate dropping to 5.3 percent has surfaced in housing, where demand is outpacing the supply of homes and creating more pressure to build houses and apartments.

The market for new homes has just 4.5 months of supply, compared to 6 months in a healthy market.

The shortage has caused a 10.5 percent increase in building permits year-to-date. Still, the increase in May permits was so strong that the figure likely slipped in June, according to FactSet.

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Builders are increasingly optimistic.

The National Association of Home Builders/Wells Fargo builder sentiment index released Thursday climbed to 60 this month, a level last reached in November 2005 — shortly before the housing boom gave way to the mortgage crisis that triggered the Great Recession. Readings above 50 indicate more builders view sales conditions as good rather than poor.

Mortgage rates have started to rise, although they remain low by historic standards.

The average 30-year, fixed mortgage rate was 4.09 percent last week, according to the mortgage firm Freddie Mac. That is up from a 52-week low of 3.59 percent.