U.S. housing starts rose to a near eight-year high in July as builders ramped up construction of single-family homes, the latest indication that the economy was firing on almost all cylinders.
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Groundbreaking increased 0.2 percent to a seasonally adjusted annual pace of 1.21 million units, the highest level since October 2007, the Commerce Department said on Tuesday. June's starts were revised sharply higher to a 1.20 million-unit rate from the previously reported 1.17 million-unit pace.
Housing starts have now been above a one million-unit pace for four straight months. Economists polled by Reuters had forecast groundbreaking on new homes rising to a 1.19 million-unit pace last month.
The sturdy starts report added to solid payrolls, retail sales and industrial output data in suggesting the economy got off to a strong start in the third quarter. The steady flow of upbeat economic reports bolsters expectations that the Federal Reserve will raise interest rates in September.
Housing is getting a tailwind from a tightening labor market, which is encouraging young adults to move from their parents' basements and set up their own lodgings.
In July, groundbreaking for single-family homes, which accounts for the largest share of the market, surged 12.8 percent to a 782,000 unit pace, the highest level since December 2007. Single-family home building in the South, where most of the home construction takes place, rose to the highest level since January 2008.
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Starts in the Northeast tumbled 27.5 percent after being boosted in recent months as builders took advantage of tax incentives that expired in mid-June. However, single-family starts in the Northeast rose to the highest level since October 2013.
Starts for the volatile multifamily segment fell 17 percent to a 424,000,000 unit rate.
While building permits fell 16.3 percent in July to a 1.12 million-unit pace, that followed three straight months of hefty increases. The decline is likely to be temporary after a report on Monday showed confidence among homebuilders climbed to a near 10-year high in August.
Single-family building permits slipped 1.9 percent in July. Multi-family building permits tumbled 31.8 percent. (Reporting By Lucia Mutikani)