US home construction expected to show further rebound in June

The Commerce Department reports on U.S. home construction in June. The report will be released at 8:30 a.m. EST Thursday.

STARTS UP: The forecast is that housing construction increased 1.5 percent to an annual rate of 1.02 million homes in June, according to a survey of economists by data firm FactSet.

REBOUNDING ACTIVITY: In May, the pace of construction slipped, with many Americans still struggling to afford new houses. Builders started work at a seasonally adjusted annual rate of 1.01 million homes, down 6.5 percent from April.

Home construction has struggled to gain traction this year, limiting its ability to contribute as much to economic growth.

But economists are hopeful that the housing market is gaining some momentum after its recent slump.

The National Association of Home Builders reported Wednesday that homebuilder confidence surged, reflecting a pickup in sales of new homes and heightened expectations for sales in the second half of the year.

The builders' sentiment index rose to 53, up four points from a revised reading of 49 in June. Readings above 50 indicate more builders view sales conditions as good rather than poor. The July reading was the first month above 50 since January when the index stood at 56.

Higher mortgage rates and bad winter weather weighed on sales in late 2013 and early this year. But sales of new homes have picked up in recent months.

New home sales surged 18.6 percent in May to a seasonally adjusted annual rate of 504,000, the highest level in six years.

Even with the big May increases, sales of new homes are still running at just about half the pace of a healthy real estate market.

Economists believe there is a lot of pent-up demand for homes after many potential buyers put off purchases during the 2007-2009 recession and the weak recovery since that time. But job growth has accelerated in recent months, with an increase of 288,000 jobs in June. That has helped to push the unemployment rate down to a nearly six-year low of 6.1 percent in June.

There is optimism that employers will step up their hiring further in the second half of this year as they respond to a rebound in overall economic growth following a weak winter.

The economy shrank at an annual rate of 2.9 percent in the January-March quarter but analysts believe growth rebounded to around 3 percent in the April-June quarter and will remain around that level for the remainder of this year.