New home construction drops in June

New home starts fell 9.9 percent in June, driven largely by weakness in apartment building, an industry group reported Wednesday. The drop was unexpected, given that builders’ confidence in the housing market is hitting highs not seen since the housing boom.

New residential construction has been in recovery this year as home prices, sales and rents have risen. Privately owned housing starts in June were at a seasonally adjusted annual rate of 836,000 units.

That 10 percent drop appears out of step with survey data showing builders are highly optimistic about the future. An index measuring builder confidence rose for the third consecutive month in July to its strongest level since January 2006, the National Association of Home Builders reported Tuesday.

While June’s housing start figure was a decline from May, it was 10.4 percent higher than June 2012. Single-family home starts clocked in at an annual rate of 591,000 in June, a 0.8 percent decline from May.

Credit Suisse economists called the results a “disappointment,” but predicted the declines would reverse themselves in coming months due to the volatility of apartment building.

“Fade the noise,” the economists wrote. “For now, the momentum in actual new homebuilding softened at the end of (the second quarter), but since the weakness was centered in the noisier part (multi-, not single-family), it likely won’t be sustained.”

New permits for homes, another measure of homebuilder activity, also declined 7.5 percent from the prior month but were 16.1 percent above the same month a year ago. New permits were issued at a seasonally adjusted annualized rate of 911,000 permits last month.