Housing starts accelerate, building permits drop to lowest level in eight months

  • Housing starts rise 6.3% in June; May revised downwards
  • Starts of single-family homes rose 6.3%; multi-family up 6.2%
  • Building permits fell 5.1%; single-family homes down 6.3%

WASHINGTON, July 20 (Reuters) – US housing construction rose more than expected in June, but permits for future housing construction fell to an eight-month low, likely reflecting hesitation caused by materials construction costs as well as labor and land shortages.

Tuesday’s Commerce Department report suggested that a severe housing shortage, which has driven up prices and sparked bidding wars across the country, may persist for some time. Demand for homes is being driven by low mortgage rates and the desire for more spacious housing during the COVID-19 pandemic.

Although lumber prices fall from record levels, builders are paying more for steel, concrete and lighting, and are struggling with shortages of household appliances like refrigerators.

“Reports of months-long delays in the delivery of windows, heaters, refrigerators and other items have surfaced across the country, delaying delivery of homes and forcing builders to limit activity. , and many builders continue to report a shortage of available workers as a separate challenge, ”said Matthew Speakman, economist at Zillow.

Housing starts rose 6.3% to a seasonally adjusted annual rate of 1.643 million units last month. Data for May has been revised down to a rate of 1.546 million units from the previously reported 1.572 million units. Economists polled by Reuters had predicted that housing starts would rise at a rate of 1.590 million units.

Despite the increase last month, housing starts remained below the March rate of 1.737 million units, which was the highest level since July 2006. Housing construction rose in the west and south populated, but declined in the northeast and midwest.

Single-detached housing starts rose 6.3% to 1.160 million units. The volatile multi-family residential construction category advanced 6.2% to 483,000 units.

Housing starts rose 29.1% year-on-year in June.

Building permits for future homes fell 5.1% to a rate of 1.598 million units in June, the lowest level since October 2020. Permits are now lagging behind, suggesting that home construction will slow In the coming months.

Wall Street stocks were trading higher after falling sharply on Monday. The dollar (.DXY) appreciated against a basket of currencies. US Treasury yields have fallen.

PRUDENT MANUFACTURERS

As lumber futures have fallen nearly 70% from their peak in early May, economists warn that higher prices are likely to prevail amid wildfires in western Canada. United States.

Real estate signs advertise new homes for sale in several new developments in York County, South Carolina, USA, February 29, 2020. REUTERS / Lucas Jackson / File Photo

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Dustin Jalbert, lumber team leader at Fastmarkets RISI, also noted that log prices are skyrocketing inside the Canadian province of British Columbia and tariffs are expected to increase for Canadian producers later this year.

There are also signs that the exodus to suburbs and other low density areas in search of larger housing for home offices and school is gradually fading as COVID-19 vaccinations allow businesses. to recall workers to downtown offices.

An increase in COVID-19 infections among unvaccinated Americans also poses a risk to the housing market outlook.

Economists expect the housing market, one of the best performers in the economy during the coronavirus pandemic, to have weighed slightly on gross domestic product in the second quarter.

However, residential construction remains supported by the shortage of housing available for sale. Used home inventory is near its all-time low, leading to double-digit growth in median home prices.

A survey by the National Association of Home Builders on Monday showed that builders’ confidence of single-family homes fell to its lowest level in 11 months in July.

Shortages and rising input prices likely weighed on new home sales in June. The Mortgage Bankers Association’s Builder Applications Survey, which was released on Tuesday, showed mortgage applications for the purchase of new homes fell 23.8% in June from a year ago. a year. Requests were down 3% from May. Data have not been adjusted for typical seasonal models. The Commerce Department is due to release new home sales data for June next Monday.

Home builders and a group of other stakeholders met with White House officials last Friday, including Commerce Secretary Gina Raimondo and Housing and Urban Development Secretary Marcia Fudge, to discuss strategies for dealing with the short-term supply chain disruptions in the homebuilding industry.

Building permits fell in all four regions in June. Single-family housing permits fell 6.3% to a rate of 1.063 million units, the lowest since August 2020. Multi-family housing permits fell 2.6% to a rate of 535,000 units.

The order book for new single-family homes increased in June to reach its highest level since October 2006.

“Numerous anecdotal reports indicate that builders are delaying or refusing orders to allow shortages to ease and catch up with a growing construction delay,” said Mark Palim, deputy chief economist at Fannie Mae in Washington.

Home completions fell 1.4% to a rate of 1.324 million units last month. Single-family home completions fell 6.1% to 902,000 units, the lowest level since October.

Realtors estimate that housing starts and completion rates for single-family homes need to be between 1.5 million and 1.6 million units per month to close the inventory gap.

The housing stock under construction rose 1.8% to a rate of 1.359 million units last month.

Reporting by Lucia Mutikani Editing by Chizu Nomiyama and Paul Simao

Our Standards: Thomson Reuters Trust Principles.

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