WASHINGTON: US homebuilding fell more than expected in July, the latest sign that surging construction costs and home prices continued to constrain the housing market early in the third quarter.
Though the report from the Commerce Department on Wednesday showed a rebound in building permits last month, the increase was led by the volatile multi-family home segment, which will do little to ease an acute housing shortage. The number of houses authorized for construction but not yet started rose, indicating builders remained hesitant to undertake new projects.
“There is a record-high level of backlogs of units that have been authorized but not started over the last four months, which we see as a corroborating sign of supply-side challenges, and we do not interpret this report as a sign of flagging demand for housing,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Housing starts dropped 7.0% to a seasonally adjusted annual rate of 1.534 million units last month. Data for June was revised up to a rate of 1.650 million units from the previously reported 1.643 million units.
Homebuilding fell in the Northeast, Midwest and West, but rose in the populous South. Economists polled by Reuters had forecast starts would fall to a rate of 1.600 million units. Starts increased 2.5% on a year-on-year basis in July.
Single-family starts, which account for the largest share of the housing market, fell 4.5% to a rate of 1.111 million units. Starts for the multi-family segment tumbled 13.1% to a rate of 423,000 units.
Permits for future homebuilding rose 2.6% to a rate of 1.635 million units in July. Single-family permits fell 1.7% to a rate of 1.048 million units. Permits for multi-family housing projects jumped 11.2% to a rate of 587,000 units.
The report followed on the heels of a survey from the National Association of Home Builders on Tuesday showing confidence among single-family homebuilders dropped to a 13-month low in August because of higher material costs and home prices, which are cooling demand for houses. US stocks opened lower. The dollar was steady against a basket of currencies. US Treasury prices fell.