US housing starts plunge by most since 2016 to nine-month low
Higher mortgage rates and elevated costs for labor and materials continue to pinch the housing market.
US new-home groundbreaking and permits fell in June to the slowest pace in nine months, as higher mortgage rates and elevated costs for labor and materials pinch the housing market, government figures showed Wednesday.
While the data are volatile and often subject to significant revisions, the report may spark concern that the housing market is slowing even more than previously thought amid constraints for both buyers and developers.
Potential customers are grappling with elevated interest rates and ever-rising home prices that are easily outpacing wage gains, even as a robust job market and tax cuts are supporting demand. For builders, issues include elevated prices of lumber and other imported materials, partly due to tariffs. Developers have also cited difficulties finding qualified workers and ready-to-build lots.
The data follow a report Tuesday showing that a gauge of home builders’ confidence was unchanged in July from the prior month to match the lowest level this year. An index of the six-month sales outlook fell to the lowest since September, according to the survey from the National Association of Home Builders/Wells Fargo.
Some 160,000 homes were authorized but not yet started in June, up from 158,000 in May. The number of housing units currently under construction was 1.12 million, down slightly from the prior month.
“New single-family building permits, which are the leading indicator of construction of new homes, rose by 4.6 percent in June – the second lowest growth rate in 2018,” said Sam Khater, Freddie Mac chief economist. “There’s been a noticeable slowdown in single-family permit activity this year, and especially the last four months, which have had two of the three lowest readings over the last three years.”
“It’s alarming that the single-family construction permit growth is decelerating at a time when homeownership is rising and millennials are reaching their peak age to really enter the market and buy their first home. The growing imbalance between demand and supply is the reason home prices continue to escalate.”
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