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Home construction fell sharply in July, proving that high construction costs and soaring house prices continued to be a drag on the housing market.
Housing starts fell 7 percent to a seasonally adjusted annual rate of 1.534 million units last month, according to a Commerce Department report (pdf). Although this was the slowest pace since April, it remained 2.5% above the July 2020 figure.
Building permits, a leading indicator of future construction, climbed 2.6% in July, reversing a three-month downtrend. Still, gains were confined to the multi-family home segment, as building permits for single-family homes fell 1.7% in the month, suggesting little relief from the housing shortage that is pushing up prices and pushing more. in addition potential buyers away.
Home builders have been hit by rising costs for materials and skilled labor, which, combined with a housing shortage, have pushed up home prices. The median price of an existing single-family home in the United States jumped 22.9% in the second quarter of 2021 from the period a year earlier, reaching a record high of $ 357,900, the National Association said. of Realtors in a 12 report.
Rising home prices have increasingly sidelined potential buyers, with a recent report from the National Association of Home Builders (NAHB) showing that the top reason cited by people actively looking to buy a home for not pressing the trigger for a purchase was the inability to find one in their price scale. Two-thirds of active buyers in Q2 2021 spent three months or more looking for a home but were left empty-handed.
The Commerce Department’s new homebuilding report also showed that the number of homes cleared for construction but not yet started in July rose 2.6 percent per month to the third-highest figure on record, bolstering the view that builders were reluctant to undertake new projects.
“While demographics and interest in buying homes remain strong, higher costs and issues with access to materials have driven home construction levels down and even suspended some new home sales.” NAHB chief economist Robert Dietz said in a statement.
The Commerce Department’s Aug. 18 report followed an Aug. 17 investigation by the National Association of Home Builders that showed builders’ confidence plunged to a 13-month low in August due to rising materials costs. and house prices, with a cooling effect on demand.
âBuyer traffic has fallen to its lowest level since July 2020 as some potential buyers are experiencing sticker shock from higher construction costs,â NAHB President Chuck Fowke said in a statement.
Even though the cost of lumber has fallen from an all-time high of $ 1,711 per thousand board feet in May, material costs remain an issue, compounded by land and labor shortages. artwork.
While the Commerce Department report showed that single-family home completions rose 3.6 percent to a rate of 954,000 units in July, realtors estimate housing starts and completion rates Single family homes should be in a range of 1.5 million to 1.6 million units per month. to fill the inventory gap.
Reuters contributed to this report.
By Tom Ozimek
Tom Ozimek has extensive experience in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s ever heard is from Roy Peter Clark: âHit your targetâ and âleave the best for lastâ.