US home construction expected to post rebound in July following big June decline

The Commerce Department reports on U.S. home construction in July. The report will be released at 8:30 a.m. Eastern time Tuesday.

CONSTRUCTION UP: The expectation is that construction increased 8.1 percent in June to a seasonally adjusted annual rate of 965,000, according to a survey of economists by data firm FactSet.

JUNE DIP: In June, construction fell 9.3 percent to an annual rate of 893,000 homes, the slowest pace in nine months.

Applications for building permits, considered a barometer of future construction, also declined in June, dropping 4.2 percent to a rate of 963,000.

Analysts believe the June decline in construction was influenced by temporary factors such as heavy rain in parts of the South.

A report Monday indicated homebuilders are feeling more confident about their sales prospects, a hopeful sign that home construction and sales of newly built homes could pick up after stalling in recent months.

The National Association of Home Builders/Wells Fargo builder sentiment index rose in August to 55, up two points from a revised 53 for July. That is the third straight monthly increase and put the index at its highest reading since January, when it was 56. Readings above 50 indicate more builders view sales conditions as good rather than poor.

Builders' views of current sales conditions for single-family homes, their outlook for sales over the next six months and traffic by prospective buyers all increased in August, brightening the outlook.

Sales of new homes are running behind last year's pace. They fell 8.1 percent in June to a seasonally adjusted annual rate of 406,000.

A mix of rising home prices, higher mortgage rates and weak wage growth have made it more difficult for potential buyers to buy a newly built home. These factors have particularly depressed demand by first-time buyers.

But economists are still looking for a rebound, given the fact that the U.S. economy has been adding jobs at a healthy clip with gains topping 200,000 jobs for six straight months through July.

Housing, while still a long way from the boom of the last decade, has been recovering over the past two years. Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the Home Builders.