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Housing continues to disappoint, even when the news is technically better. This morning's report on homebuilding was a case in point. At 8:30 AM (EDT), the U.S. Census Bureau reported that housing starts increased in July by a somewhat greater-than-expected 1.7% to an annualized rate of 546,000 units. Originally, June's housing starts had been measured at 549,000 units. Thus, July's total was actually less than the initial June tally, but better than the downwardly revised 537,000 units for that month. Expectations for July had ranged from 525,000 to 615,000 units, according to 74 projections by a leading industry survey. The average projection was 550,000, or a shade better than the actual estimate of 546,000.

In truth, these survey results--even the more upbeat projections--are all downbeat. Housing is in the doldrums and there is no quick or easy fix for what ails this moribund sector. By way of comparison, starts exceed 2.3 million annualized units in early 2006, a year that is generally recognized as the peak of the overbuilt cycle. The July tally for starts, meantime, was also seven percent below the year-earlier figure.
 
Meanwhile, building permits, considered more of a leading indicator than starts, fell last month, dropping by 3.1% to an estimated 565,000 units. Builders are clearly struggling to drum up demand for housing following April's expiration of governmental support for the industry--even with mortgage rates at an all-time low. The problems in attracting buyers are far-reaching, and include rising foreclosures (which are adding to the glut of unsold homes), the perception of housing as no longer an assured investment, and the woeful employment outlook, headlined by a jobless rate that is still within striking distance of 10%. At the same time, homebuilder sentiment continues to slide, falling in August to its lowest level since March of 2009, according to the National Association of Realtors. This downbeat assessment was underscored earlier this month by Donald Tomnitz, CEO of homebuilder D.R. Horton (DHI), who said that ``the next 12 to 24 months will be challenging in the homebuilding industry.'' That admission, which came as no surprise, suggests that we could be seeing disquieting news on this front for quite some time yet.
 
Absent at least a modest rebound in this critical sector, it is hard to see a vigorous overall expansion in the nation's economy--and, in fact, we do not entertain such expectations, seeing, at best an uninterrupted, but unprepossessing, business expansion through next year, before, hopefully, a more inclusive upturn gets into gear.