© Reuters. File photo: On February 29, 2020, in a number of new developments in York County, South Carolina, the real estate signs advertised new homes for sale. REUTERS/Lucas Jackson/File Photo
WASHINGTON (Reuters)-US housing construction growth exceeded expectations in June, but future housing construction permits have fallen to an eight-month low, which may reflect the uncertainty caused by expensive construction materials and labor and land shortages.
A report released by the US Department of Commerce on Tuesday showed that a severe shortage of homes that pushed up housing prices and triggered a bidding war across the country may continue for some time. During the COVID-19 pandemic, low mortgage interest rates and the desire for more spacious accommodation have driven demand for housing.
Although timber prices have fallen from historical highs, builders are paying more for steel, concrete and lighting equipment, and are struggling to cope with the shortage of refrigerators and other appliances.
“Reports of months of delays in the delivery of windows, heaters, refrigerators, and other items have emerged across the country, causing delays in home delivery and forcing builders to restrict activities. Many builders continue to point to the shortage of available workers as a separate challenge,” Zillow said. Economist Matthew Speakman said.
The number of new housing starts last month increased by 6.3%, and the annual rate was 1.643 million units adjusted for seasonal factors. The data for May was revised down to 1.546 million units from the previously reported 1.572 million units. Economists surveyed by Reuters had predicted that the operating rate would rise to 1.590 million units.
Despite the increase last month, the number of starts is still lower than the 1.737 million units in March, which is the highest level since July 2006. Housing starts in the western and densely populated southern regions have increased, but housing starts in the northeast and midwestern regions have declined.
The number of single-account starts increased by 6.3% to 1.160 million units. The volatile multi-family residential building category rose 6.2% to 483,000 units.
The operating rate in June increased by 29.1% year-on-year.
Future residential building permits in June fell 5.1% to 1.598 million units, the lowest level since October 2020. Permits are now lagging behind, indicating that residential construction will slow down in the coming months.
After the sharp sell-off on Monday, US stocks opened higher. The dollar rose against a basket of currencies. U.S. Treasury yields fell.
Chart: Housing starts and building permits: https://graphics.reuters.com/USA-STOCKS/myvmnmmqypr/hsbp.png
According to the latest producer price data, although timber futures fell by nearly 70% from the historical high in early May, the price of softwood in June rose by 125.3% year-on-year.
There are also signs that because vaccinations have enabled companies to recall workers to downtown offices, the influx of people into suburbs and other low-density areas to find larger homes for home offices and schools is gradually disappearing. The rising COVID-19 infection rate among unvaccinated Americans also poses a risk to the prospects of the real estate market.
Chris Rupkey, chief economist at FWDBONDS in New York, said: “As confidence began to falter earlier during the economic reopening period, builders became more cautious and reduced new building permits.
The supply of second-hand housing is close to historical lows, leading to a double-digit increase in median house prices.
A survey conducted by the National Association of Home Builders on Monday showed that the confidence of single-family home builders fell to the lowest point in 11 months in July. NAHB pointed out that “builders continue to work hard to cope with rising building material prices and supply shortages, especially the price of oriented strand board, which has soared by more than 500% from its January 2020 level.”
Homebuilders and other stakeholder groups met with White House officials last Friday, including Secretary of Commerce Gina Raimundo and Secretary of Housing and Urban Development Marcia Fudge to discuss strategies to address short-term supply chain disruptions in the residential construction industry.
In June, building permits fell in all four areas. Single-family residential permits fell 6.3% to 1.063 million units. Permits for multi-family dwellings fell 2.6% to 535,000 units.
Housing completions fell 1.4% last month to 1.324 million units. Single-family residential completions fell 6.1% to 902,000 units, the lowest level since October.
Real estate agents estimate that the start rate and completion rate of single-family houses need to be between 1.5 million and 1.6 million units per month to close the inventory gap.
The stock of houses under construction rose 1.8% to 1.359 million units last month.