Ahead of the Bell: Housing Starts

WASHINGTON - A government report on construction of new homes is expected to show a small dip for June, while applications for building permits likely edged up.

Construction of new homes and apartments slipped 0.4 percent to seasonally adjusted annual rate of 530,000 units last month, according to economists surveyed by Thomson Reuters. The May rate of 532,000 was better than economists had expected and came after construction fell in April to a record low of 454,000 units.

Building permits, seen as a good indicator of future activity, are expected rise 0.4 percent to an annual rate of 520,000 units in June.

The Commerce Department is scheduled to release the report Friday at 8:30 a.m. EDT.

The better-than-expected rebound in May construction was viewed as a signal that the prolonged slump in housing was nearing an end.

A collapse in the housing market led to soaring loan losses, a banking system crisis and the longest recession since World War II. A healthy home market is needed to support an economic recovery.

The National Association of Home Builders said Thursday that its housing market index rose two points to 17 in July, the highest level in nearly a year. Readings below 50 indicate negative sentiment about the market. The last time it was above 50 was April 2006.

Homebuilder stocks got a bump earlier this week after a Stifel, Nicolaus & Co. analyst upgraded major builders DR Horton Inc. and Toll Brothers Inc. based on the view that the slide in home prices will moderate.

Still, analysts don't expect a quick rebound. The economy is shedding jobs and home prices are falling in many places, making many potential buyers hesitant.

A glut of unsold homes and a record wave of mortgage foreclosures dumping more properties on the market likely will delay any uptick in construction until next spring, many analysts say.

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