Homebuilding in June declines 0.9%
WASHINGTON — U.S. home construction slipped last month as an uptick in the building of single-family homes was offset by a big drop in apartment construction.
The Commerce Department said Wednesday that construction was started at a seasonally adjusted annual rate of 1.25 million in June, down 0.9% from 1.27 million in May.
Single-family starts advanced 3.5% to an annualized rate of 847,000, and permits edged up 0.4% to 813,000.
Starts of multifamily homes, a category that tends to be volatile and includes apartment buildings and condominiums, slumped 9.2%, and permits plunged 16.8%.
Applications for all residential building permits, an indication of future construction, fell 6.1% last month to 1.22 million, the lowest since May 2017.
The figures on one-family home construction signals the sector is relatively stable as lower borrowing costs and more subdued price appreciation make homeownership more affordable. Home construction hasn’t contributed to economic growth since the fourth quarter of 2017. A report Tuesday showed homebuilder sentiment increased in July during solid demand for single-family homes and prospective buyer traffic.
Falling mortgage rates are expected to spur home construction, overriding other concerns such as shortages of building lots and construction workers. The average rate on a 30-year, fixed-rate home loan last week stood at 3.75%, down from 4.53% a year ago.
“Still, pullback in building permits in June suggests further weakness could be in the pipeline,” Shernette McLeod, economist at TD Economics, said in a research note. “Rising costs, lack of land and labor shortages continue to pose challenges to builders, impeding their ability to fully take advantage of lower borrowing rates to construct more in demand entry-level units.”
Housing starts rose 31.3% from May to June in the Northeast and 27.1% in the Midwest but fell 9.2% in the South and 4.9% in the West.
About 165,000 homes were authorized but not yet started, the fewest in a year, indicating builders have less of a backlog.
The report has a wide margin of error, with a 90% chance that the headline figure was between an 8.8% decline and 7% gain.
Separately, on Wednesday the National Association of Realtors reported a big drop in foreign investment in U.S. homes. The association found that foreign buyers bought $77.9 billion worth of existing U.S. homes from April 2018 through March this year. That marked a 36% drop from the same period a year earlier.
“A confluence of many factors — slower economic growth abroad, tighter capital controls in China, a stronger U.S. dollar, and a low inventory of homes for sale — contributed to the pullback of foreign buyers,” said Lawrence Yun, the association’s chief economist. “However, the magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.”
Fed Chairman Jerome Powell addressed the issue last week when he said at a congressional hearing that homebuilders are being held back by a “series of factors” including higher material costs, a skilled-labor shortage, and President Donald Trump’s tariff and immigration policies.