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US housing starts touch 9-mth low; permits fall
Housing starts fall 12.3% in June; single-family starts drop 9.1%; building permits decrease 2.2%
US homebuilding fell to a nine-month low in June and permits declined for a third straight month, dealing a blow to the housing market as it struggles with a dearth of properties available for sale.
Higher lumber prices and shortages of land and labour are constraining homebuilding.
The housing market is lagging overall economic growth, which appears to have accelerated in the second quarter after hitting a soft patch at the start of the year.
“We’re seeing pressure on both sides of the market, from increasingly expensive inputs on the supply side to prices that are charging ahead of wage growth on the demand side, and the result is that neither builders nor buyers can keep up,” said John Pataky, chief consumer and commercial banking executive at TIAA Bank in Jacksonville, Florida.
Housing starts tumbled 12.3% to a seasonally adjusted annual rate of 1.173mn units last month, the lowest level since September 2017, the Commerce Department said yesterday.
The percentage drop was the biggest since November 2016 and both single and multifamily home construction declined in June.
Data for May was revised down to show starts rising at a 1.337mn-unit rate instead of the previously reported 1.350 million-unit rate. Starts fell in all four regions last month. Building permits dropped 2.2% to a rate of 1.273mn units, also the lowest level since September 2017. Economists polled by Reuters had forecast housing starts falling to a pace of 1.320mn units last month and permits rising to a rate of 1.330mn units.
The dollar slightly extended losses against a basket of currencies after the data while prices for US Treasuries rose.
Single-family homebuilding, which accounts for the largest share of the housing mar- ket, decreased 9.1% to a rate of 858,000 units in June. Single-family homebuilding has lost momentum since hitting a pace of 948,000 units last November, which was the strongest in more than 10 years.
A survey on Tuesday showed confidence among single-family homebuilders unchanged in July, with builders continuing to be “burdened by rising construction material costs.”
The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber, which builders say have boosted the price of a new single-family home.
Residential investment contracted in the first quarter. June’s sharp drop in homebuilding could impact on economists’ forecasts for second-quarter growth, which are as high as a 5.3% annualised rate. The economy grew at a 2.0% pace in the first quarter.
While permits to build single-family homes rose 0.8% in June to a pace of 850,000 units, they continued to trail starts.
This suggests moderate gains in single-family homebuilding in the months ahead.
Starts for the volatile multi-family housing segment plunged 19.8% to a rate of 315,000 units in June. Starts for buildings with five units or more fell to a 10-month low.
Permits for the construction of multi-family homes dropped 7.6% to a pace of 423,000 units. The housing inventory squeeze is unlikely to ease.
Housing completions were unchanged at a rate of 1.261mn units in June.
The number of single-family houses completed last month fell 2.3%. Realtors estimate that housing starts and completion rates need to be in a range of 1.5mn to 1.6mn units per month to plug the inventory gap.