- Housing starts rose 3.9% in August; July revised upwards
- Starts of single-family homes plummet 2.8%; multi-family jump 21.6%
- Building permits jump 6.0%; increase in single-family homes 0.6%
WASHINGTON, Sept.21 (Reuters) – Construction of single-family homes in the United States fell for a second straight month in August, as builders continued to tackle material and labor shortages, suggesting that the housing could remain a drag on economic growth in the third quarter.
Tuesday’s Commerce Department report also showed that the number of homes approved to build but not yet started hit an all-time high last month, a sign of builders’ reluctance to take on new projects.
The inability of builders to increase the production of single-family homes in a context of massive housing shortages is pushing up prices and preventing some first-time buyers from the market.
“While lumber prices have fallen in the spot market, those lower prices have yet to reach home builders,” said Mark Vitner, senior economist at Wells Fargo in Charlotte, North Carolina. “In addition, other essential building materials remain scarce, including windows, cabinets, electrical circuit breakers and wedge anchors.”
Starts of single-family homes, which account for the largest share of the housing market, fell 2.8% to a seasonally adjusted annual rate of 1.076 million units last month. The decline was offset, however, by an increase in housing starts in the volatile multi-family housing segment.
As a result, all housing starts rose 3.9% to 1.615 million units in August. Data for July has been revised at a rate of 1.554 million units from 1.534 million units previously reported. Economists polled by Reuters had predicted that housing starts would rebound at a rate of 1.555 million units. Housing starts jumped 17.4% from August 2020.
Single-family home starts fell in the West and Midwest. They increased in the northeast and the densely populated south.
Construction costs remain an issue even as lumber futures fell from a record high of $ 1,711 per thousand board feet in May to around $ 604 in Tuesday morning trading.
Single-family home construction has struggled to gain ground since it hit a rate of 1.255 million units in March, which was the highest level since November 2006.
Starts of buildings with five or more units climbed 21.6% to 530,000 units last month, the highest level since January 2020. The multi-family segment is being driven by demand for car rentals. COVID-19 vaccinations allow companies to recall workers to downtown offices.
At the start of the coronavirus pandemic, there was an exodus from cities as people worked from home and took online classes, fueling demand for larger homes in suburbs and other low-density areas. As the tailwind of the pandemic fades, housing demand remains strong thanks to near-record mortgage rates and rising wages due to the tight labor market.
Although the Federal Reserve is expected at the end of a two-day policy meeting on Wednesday to pave the way for reducing its monthly bond purchases later this year, it will likely have a limited impact on mortgage rates. The US powerhouse is expected to keep its overnight key rate close to zero for some time.
A survey by the National Association of Home Builders on Monday showed that builders’ confidence of single-family homes rose slightly from a 13-month low in September, but noted that “delivery times remain elongated and the Chronic labor shortage in construction is expected to persist “.
Shares on Wall Street rose as investors assessed the risk of contagion from indebted Chinese developer Evergrande. The dollar (.DXY) dipped against a basket of currencies. US Treasury prices were mixed.
STRONG RENTAL DEMAND
Residential investment contracted in the second quarter after three consecutive quarters of double-digit growth. A further decline this quarter is likely.
“The weakness in single-family housing starts suggests somewhat lower residential investment,” said Blerina Uruci, economist at Barclays in Washington.
Future building permits rose 6.0% to 1.728 million units in August. Single-family permits gained 0.6% to a rate of 1.054 million units. Permits for buildings with five or more units jumped 19.7% to 632,000 units, the highest level since January 1990.
“We speculate that this force in multi-family housing may be a response to the surge in asking rents and low rental vacancy rates,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York City.
The backlog of units to be started rose 3.7% to a record 251,000 units. Single-family homes that had yet to be started were near a 15-year high.
Home completions fell 4.5% to a rate of 1.330 million units last month. Single-family home completions increased 2.8% to 971,000 units. The pandemic has lengthened the time between the issuance of a permit for the construction of single-family homes and completion, which economists attribute to supply constraints.
Used home inventory is near its all-time low, leading to record double-digit annual home price growth.
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 1.7% to a rate of 1.404 million units last month.
“Supply issues will limit production for some time to come, and we expect single-detached housing starts to increase only gradually from here, reaching 1.16 million annualized by the next year. end of 2021, “said Matthew Pointon, senior real estate economist at Capital Economics in New York City. .
Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci
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