WASHINGTON- US homebuilding fell more than expected in July, the latest sign that surging construction costs and home prices continued to constrain the housing market early in the third quarter.
Though the report from the Commerce Department on Wednesday showed a rebound in building permits after three straight monthly declines, the gain was in the volatile multi-family home segment, which will do little to ease an acute housing shortage that is driving up prices.
The number of houses authorized for construction but not yet started last month was the third highest on record, indicating builders remained hesitant to undertake new projects.
“There is no question that home building has hit some sort of near-term ceiling, with surging home prices reducing affordability and leading to a record drop in the proportion of consumers that feel now is a good time to buy a home,” said Mark Vitner, a senior economist at Wells Fargo in Charlotte, North Carolina.
Housing starts dropped 7.0 percent to a seasonally adjusted annual rate of 1.534 million units last month. Data for June was revised up to a rate of 1.650 million units from the previously reported 1.643 million units. Economists polled by Reuters had forecast starts would fall to a rate of 1.600 million units.
Homebuilding fell in the Northeast, Midwest and West, but rose in the populous South.
Starts increased 2.5 percent on a year-on-year basis in July. Single-family starts, which account for the largest share of the housing market, fell 4.5 percent to a rate of 1.111 million units. Starts for the multi-family segment tumbled 13.1 percent to a rate of 423,000 units.
Permits for future homebuilding rose 2.6 percent to a rate of 1.635 million units in July.
Single-family permits fell 1.7 percent to a rate of 1.048 million units. They are lagging starts, suggesting a modest rebound in single-family homebuilding.
Permits for multi-family housing projects jumped 11.2 percent to a rate of 587,000 units, reflecting a rebound in demand for rental accommodation as the economy fully reopens.
The report followed on the heels of a survey from the National Association of Home Builders on Tuesday showing confidence among single-family homebuilders dropped to a 13-month low in August because of higher material costs and home prices, which are cooling demand for houses. – Reuters
