Homebuilding Dips to 9-Month Low
July 19, 2018
The start of summer was sluggish for homebuilders. Homebuilding fell 12.3 percent in June to a seasonally adjusted annual rate of 1.17 million units, the U.S. Commerce Department reported Wednesday. This marks the lowest level since September 2017 and the largest percentage drop in a month in nearly 2 years. Housing starts were down in all four major regions last month—by 40 percent in the Northeast and nearly 36 percent in the Midwest.
Housing permits, a gauge of future construction, also tumbled in June, dropping 2.2 percent to a rate of 1.27 million units. Permits were also at the lowest level since September 2017.
Single-family homebuilding—the largest sector within housing starts—continued to lose its momentum in June, falling 9.1 percent to a rate of 858,000 units. Builders say they’re “burdened by rising construction material costs.” In April 2017, President Donald Trump's administration imposed antisubsidy duties on imports of Canadian softwood lumber. Builders say that they’ve been forced to hike the price of new single-family homes in response. Combined with land and labor shortages, builders say it’s a lot harder to build these days.
"The concern over material costs, especially lumber, is making it more difficult to build homes at competitive price points, particularly for newcomers entering the housing market,” says Michael Neal, senior economist at the National Association of Home Builders. “Moreover, the soft permit report does not suggest a significant increase in housing production in the near term. However, consumer demand for single-family housing continues to increase as the overall economy and labor market strengthen.”
Meanwhile, housing starts for the multifamily sector decreased 19.8 percent last month, reaching a rate of 315,000 units. Multifamily starts for buildings that have five units or more dropped to a 10-month low in June.
“U.S. Housing Starts Hit Nine-Month Low; Permits Drop,” Reuters (July 18, 2018) and National Association of Home Builders
Updated: August 15, 2018