New home construction fell 7 percent in July as builders tackled massive backlogs on more recent contracts, data released by the Commerce Department showed Wednesday.
Private housing starts hit a seasonally adjusted annualized rate of 1.53 million in July, falling below the revised June rate of 1.65 million while remaining 2.5% above the same month on last year. Starts of single-family homes fell 4.5% and starts of homes with five or more units fell 13.6%.
Home sales and construction declined steadily throughout the summer after soaring lumber prices earlier in the year drastically increased the cost of home construction. As lumber prices approached historic levels, home prices continued to break records as builders battle other supply issues and backlogs.
“Builders continue to face severe shortages of materials, labor and land. We expect residential investment to remain weak in the third quarter, ”wrote Yelena Maleyev, economist at Grant Thornton.
“Home prices continue to rise in many markets as builders and sellers slowly add supply,” she continued. “Bidding wars and record prices are a by-product of the lack of supply. Speculators have entered the bidding war and oust first-time buyers. “
The dire housing shortage and double-digit annual price hikes have created a wedge between households wealthy enough to own a home and those struggling to buy for the first time.
Buyers able to afford significantly more expensive homes have seen their wealth increase amid soaring prices. But those who are unable to keep up with rising prices have been left behind, threatening to worsen income inequality.
Democrats and Republicans have sounded the alarm bells about the lack of affordable housing, and President BidenJoe Biden Pressure grows for a breakthrough in Biden agenda talks The state school board is quitting the national association saying they have called out the parents of national terrorists. uncertainty over whether the United States can maintain the nationwide downward trend in COVID-19 PLUS cases prioritized expanding housing supply through the $ 3.5 trillion Democratic Social Support and Infrastructure Plan. GOP lawmakers have balked at spending billions of dollars on new construction, but backed other tax incentives and zoning reforms that could receive support from Democrats.
“Manufacturers will remain busy until 2022 as they resolve backlogs as supply chain issues finally ease in the second half of the year. More supply will come online, but at the higher end. First-time buyers will be left on the sidelines as high house prices persist, ”Maleyev wrote.