WASHINGTON – Construction of new U.S. homes rose in June to the highest level in seven months as builders rushed to pour foundations for homes that must be completed by the end of November for first-time buyers to take advantage of a special tax break.
The Commerce Department said Friday that construction of new homes and apartments jumped 3.6 percent last month to a seasonally adjusted annual rate of 582,000 units, from an upwardly revised rate of 562,000 in May.
It was better than the 530,000-unit pace economists expected, and was the second straight monthly increase after April’s record low of 479,000 units.
“This was the most positive housing report in ages,” wrote Patrick Newport, an economist with IHS Global Insight.
Home buyers are being attracted by lower prices, and first-time buyers can also take advantage of a tax credit worth 10 percent of the purchase price, with a cap of $8,000, which was included in the federal stimulus package.
“The largest spark … has been the looming deadline,” said David Crowe, chief economist for the National Association of Home Builders. His trade group said Thursday that the confidence level of builders has risen to the highest level in nearly a year.
Shares of major home builders rose on the news with Beazer Homes and Hovnanian Enterprises up about 5 percent in midday trading. The broader stock indexes, meanwhile, were little changed Friday after Bank of America and Citigroup became the latest banks to report big second-quarter profits but also weakness in their loan portfolios.
Over the past three years, the collapse in the housing market led to soaring loan losses, a severe banking system crisis and the longest recession since World War II. Even with the better-than-expected figures, the pace was still 46 percent below last year, and analysts don’t expect a quick rebound. That’s because companies are still shedding jobs and home prices are falling.