Housing starts in the United States drop sharply in July

WASHINGTON, Aug. 18 (Reuters) – US housing construction fell more than expected in July, the latest indication that soaring construction costs and house prices continued to weigh on the housing market early on of the third trimester.

Housing starts fell 7.0% to a seasonally adjusted annual rate of 1.534 million units last month, the Commerce Department said on Wednesday. The June data has been revised at a rate of 1.650 million units from the previously reported 1.643 million units.

Economists polled by Reuters predicted housing starts would fall at a rate of 1,600 million units. Permits for future housing construction rose 2.6% to a rate of 1.635 million units in July.

The report follows a National Association of Home Builders survey on Tuesday showing that builders’ confidence in single-family homes fell to its 13-month low in August due to rising material costs and home prices. , which cool the demand for homes. Read more

“Obviously, the panic buying and huge price increases that we’ve seen over the past year had to end, and that’s exactly what they’re doing,” said Joel Naroff, chief economist. at Naroff Economics in Holland, PA. “It’s not clear, however, how big a subsequent slide will be.”

Construction costs remain an issue even as lumber futures fell from a record $ 1,711 per thousand board feet in May, with the November delivery contract trading at around 483 $ Tuesday. Land and labor shortages persist.

Residential construction has struggled to gain ground since reaching a rate of 1.739 million units in March, which was the highest level since June 2006.

Demand for housing exploded during the COVID-19 pandemic, which fueled a migration from cities to suburbs and other low-density areas as Americans sought spacious housing for home offices and schools. Strong demand, also fueled by record mortgage rates, far outstripped supply, leading to double-digit annual growth in house prices.

But the tailwind of the pandemic is gradually fading, as vaccinations allow companies to remind workers in downtown offices and schools reopen for in-person learning for the new school year. Potential buyers are also balking at high home prices.

Residential investment contracted in the second quarter after three consecutive quarters of double-digit growth.

Reporting by Lucia Mutikani Editing by Paul Simao

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