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Housing Starts Rise Less Than Expected

Stocks in this article: XHB IYR LEN DHI TOL

NEW YORK ( TheStreet) -- Housing starts rose 5.9% in July, after falling in June, but the data was slightly below expectations.

The Census bureau and the Department of Housing and Urban Development said homebuilders began construction on 101,600 homes or a seasonally adjusted rate of 896,000. That is up from a revised estimate of 846,000 in June and 20% higher from a year ago.

Economists polled by Bloomberg expected housing starts to rise by 7.6% to a seasonally adjusted rate of 900,000 units from the original estimate of 836,000.

Single-family housing starts in July were at the rate of 591,000, 2.2% below June's revised figure of 604,000. Multi-family units in July stood at 290,000.

Building permits, meanwhile, rose 2.7% from June to a seasonally adjusted rate of 943,000, more than the 935,000 economists were expecting.

Homebuilder confidence is at a nearly eight-year high, but construction of new homes has lagged. That is because builders still face multiple headwinds, including a shortage of workers and developed land, soaring material costs and tight credit.

That means supply of new homes for sale continues to be tight, causing prices to rise. And homebuilders want to keep inventories lean so that they can earn a profitable margin.

Still, strong homebuilder sentiment is an indication that builders will continue to construct more homes, as the recovery continues and the industry recuperates.

-- Written by Shanthi Bharatwaj in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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