U.S. single-family homebuilding fell to near a 1-1/2-year low in July, partly due to disruption from Hurricane Beryl, but rising new housing supply could limit a rebound .
The fifth straight monthly decline in homebuilding reported by the Commerce Department on Friday suggested the housing market remained depressed at the start of the third quarter.
In addition to the weather, the housing market remains constrained by high mortgage rates and housing prices.
“Although lower interest rates should provide continued support for new home sales, existing oversupply in some regional markets may be a bigger constraint than we previously expected,” said Paul Ashworth, America’s chief economist. of the North at Capital Economics.
Single-family housing starts, which make up the bulk of homebuilding, fell 14.1% to a seasonally adjusted annual rate of 851,000 units last month, the lowest level since March 2023, the Census Bureau said. Department of Commerce.
Single-family homebuilding fell 22.9% in the densely populated South, likely depressed by Beryl, which hit Texas earlier in the month.
Starts also fell by 27.1% in the Northeast.
They fell 1.4% in the West, but rose 16.8% in the Midwest.
Single-family housing starts fell 14.8% year over year in July.
The housing market has weakened after a spring revival in mortgage rates.
Residential investment, which includes home construction, contracted in the second quarter after rising for three consecutive quarters.
“Residential construction will contribute nothing to real GDP growth this quarter,” said Christopher Rupkey, chief economist at FWDBONDS.
Mortgage rates have since retreated amid optimism that the Federal Reserve will cut interest rates next month.
But a rise in new housing inventory to levels last seen in early 2008 could limit any rebound in housing starts.
Supply concerns
New construction was driven by a lack of pre-owned homes for sale.
But the stock of existing homes has also risen from historic lows.
The average 30-year fixed-rate mortgage rate fell to 6.45% from a peak of 7.22% in May.
A survey by the National Association of Home Builders on Thursday showed that homebuilder sentiment fell to an eight-month low in August.
Builders blamed “challenging housing affordability conditions” for the fourth consecutive monthly decline in confidence.
“It is costly for builders to keep completed homes on the market, builders appear increasingly reluctant to put further resources into building the supply of new homes,” said Daniel Vielhaber, an economist at Nationwide.
Starts for housing projects with five units or more rose 11.7% to a rate of 363,000 units in July.
Overall housing starts fell 6.8% to a rate of 1.238 million units, the lowest level since May 2020. Economists polled by Reuters had expected starts to fall to a rate of 1.330 million units.
Starts fell 16.0% from a year ago.
Permits for future construction of single-family homes fell 0.1% to a rate of 938,000 units in July.
Multifamily building permits fell 12.4% to 408,000 units.
Building permits as a whole decreased by 4.0% to a rate of 1.396 million units.
The number of homes approved for construction yet to begin rose 2.6% to 279,000 units.
The backlog of single-family home construction rose 5.1% to 143,000 units.
The completion rate for that housing segment rose 0.5% to 1.054 million units.
Overall housing completions fell 9.8% to a rate of 1.529 million units.
The number of residential units under construction decreased by 1.6% to 1.539 million units.
The inventory of single-family homes under construction fell 2.1% to a rate of 653,000 units.
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