U.S. housing starts and building permits rebounded strongly in July, suggesting the housing market recovery was back on track after stalling in the second half of last year.
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Groundbreaking surged 15.7 percent to a seasonally adjusted annual 1.09-million unit pace, snapping two straight months of declines, the Commerce Department said on Tuesday.
June's starts were revised to show a 945,000-unit pace instead of the previously reported 893,000-unit rate.
Economists polled by Reuters had expected starts to rise to a 969,000-unit rate last month.
The housing market is regaining its footing after being slammed by last year's run-up in interest rates. A shortage of properties for sale has also lifted prices, pushing housing out of the reach of many first-time buyers.
Groundbreaking for single-family homes, the largest part of the market, increased 8.3 percent in July to a 656,000-unit pace. Single-family starts in the South rebounded 16.9 percent last month after dropping sharply in June.
Starts for the volatile multi-family homes segment jumped 33 percent to a 423,000-unit rate, the highest level since January 2006. This market segment is being buoyed by a shift towards renting, as many prospective buyers give up on the dream of owning a house.
The government reported last month that the homeownership rate hit a 19-year low in the second quarter, while the rental vacancy rate was the lowest in more than 19 years.
Last month, permits rose 8.1 percent to a 1.05-million unit pace. Economists had expected them to rise to a 1.0-million unit pace. Though permits are now slightly lagging starts, a survey on Monday showed confidence among single-family home builders hit a seven-month high in August, which bodes well for groundbreaking in the months ahead.
Permits for single-family homes increased 0.9 percent to a 640,000-unit pace. Permits for multi-family housing soared 23.6 percent to a 382,000-unit pace. (Reporting by Lucia Mutikani; Editing by Paul Simao)