Housing starts plummeted last month, according to new government data that highlight the uneven footing on which the country’s housing sector currently stands.
Housing starts plummeted 4.8 percent over the month in July, down 5.6 percent on the year. Leading the decline were apartment buildings and structures with five or more individual units, which sunk 17.1 percent over the month and were down 35.2 percent from where they sat in July 2016.
That’s not particularly great news for rental prices in many areas, as the lack of new housing options in the coming months will constrain supply and could potentially push rents higher. But even single-family starts suffered a setback last month, as new projects dropped 0.5 percent over the month.
The Northeast saw starts pull back 15.7 percent over the month, while the Midwest suffered a 15.2 percent drop. Only the geographic South enjoyed any semblance of overall gains last month, with starts ticking up just 0.6 percent on the month. Starts in the South are still down 16.5 percent on the year, however.
“The disparity in home building across the U.S. is striking. Just three Texas metros – Dallas, Houston, and Houston – are on pace to build nearly 130,000 homes combined this year, while several markets in the Northeast – such as New Haven, Conn. and Allentown, Pa. – will struggle to break ground on more than 1,500,” Ralph McLaughlin, chief economist at real estate hub Trulia, wrote in a research note Wednesday.
Home completions, meanwhile, dropped 6.2 percent on the month, while building permits to begin new housing projects dropped 4.1 percent from June’s total. Completions and permits, however, were still up 4.1 percent and 8.2 percent on the year, respectively.
“While the increased pace of permits, a leading indicator of starts, is encouraging, the decrease in housing starts is particularly troubling. The pace of single-family housing starts … is particularly important as it represents near-term new supply that the housing market is lacking,” Mark Fleming, chief economist at First American Financial Corporation, said in a statement Wednesday.
Fleming notes the seemingly odd divide between the number of construction jobs created in recent months – 21,000 new positions between June and July, with 5,100 going to residential construction, specifically – and the general lack of building activity.
“It’s very hard to increase housing starts without increasing residential construction employment. Yet, we are not seeing the improved residential employment situation translate into more home building,” Fleming said. “Since 2009, the number of new households has increased by 5.9 million, while the net new number of housing units has only increased by 3.5 million. There is a shortage of 2.4 million housing units in the United States.
That inventory shortage has forced more Americans to remain in rental units or live with relatives longer than they otherwise would while pushing up the prices of the relatively few affordable homes available for purchase. Home prices in many parts of the country have eclipsed their bubble-era highs from a decade ago as the nation’s construction outfits remain tentative.
Still, continued builder hiring and strong economic fundamentals appear to support the idea that housing demand will continue to thrive in the U.S. and that builders, slowly but surely, may be ready to ramp up activity, particularly in single-family houses.
“The drivers for the single-family building are solid. More jobs and higher wages are boosting incomes. Mortgage rates remain below 4 percent. Rising rents are making homeownership more attractive. And after putting off homeownership in the wake of the housing crash, more households are looking to purchase,” Gus Faucher, a senior vice president and chief economist at The PNC Financial Services Group, wrote in a research note Wednesday. “The outlook for multifamily construction is more muted. There was a boom in the multifamily building after the Great Recession, as the housing market crash led many households to turn to renting, boosting rents and spurring construction. Now that cycle has come to an end as multifamily supply has caught up to demand.”
Courtesy of USNEWS.COM and courtesy of Andrew
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