U.S. housing starts plunged unexpectedly in June to their lowest level in more than a year on a big drop in single-family home construction as rising interest rates slowed the hot housing market, a government report showed on Tuesday. Permits, a sign of builder confidence in future demand, fell to their lowest level since February, posting the biggest monthly decline in more than ten years, the Commerce Department said. Homebuilders broke ground at a seasonally adjusted annual rate of 1.802 million units last month, down 8.5 percent from an upwardly revised 1.970 million the previous month. It was the biggest drop since a 10.7 percent tumble in February 2003.
Analysts had been expecting starts to edge up to 1.99 million units. Permits dropped more than expected by 8.2 percent to 1.924 million units from a 2.097 million pace in May, the heftiest decline since an 8.7 loss in February 1994. Wall Street had expected 2.02 million units to be authorized. Single-family starts fell 9.5 percent to 1.489 million units from 1.645 million the month before, the lowest level since May 2003 and the biggest drop since February of last year. Mortgage interest rates fell to near historic lows at the beginning of 2004, fueling strong demand for homes. But with the U.S. economic recovery gaining strength, interest rates crept higher last month, making homes more expensive and dulling appetite among buyers.///