Housing starts and permits grew in June

Housing starts and building permits improved modestly in June, as the housing market continued a steady recovery.

New-home construction jumped 4.8% in June to a seasonally adjusted rate of 1.189 million, the Commerce Department said Tuesday. That’s above the 1.17 million consensus of economists surveyed by Bloomberg. The May reading dipped after April’s 4.9% leap.

Building permits increased 1.5 % to 1.15 million, heralding future gains in starts. Single-family permits gained 1% to 738,000.

Single-family housing starts rose 4.4% above the revised May rate to 778,000. New construction of multi-family homes rose 5% to 411,000.

As home prices and sales both grew at solid paces in recent months, some economists blamed restrictive zoning for tempering the gains.But a new study by research firm Trulia concludes that local delays in building permit approvals are the real obstacle.

Although housing starts and building permits posted upbeat readings in June, the less volatile quarterly numbers weren't as favorable, said Patrick Newport, economist at IHS Global Insight.

"Permits fell for the second quarter in a row, although housing starts eked out small gains in both quarters," he said. "As a result, residential investment in the second quarter will likely be a drag on GDP growth for the first time in nine quarters."

The single-family housing market is in a slump, he said, as starts dropped 3.5% in the second quarter. But strong pent-up demand should ease concerns, the economist added.

"Given that second-quarter new home sales are on track for having their best quarter in eight years, single-family housing permits will likely pick up soon."