Builders constrained by cost of lumber
The cost of supplying new homes has negatively impacted US housing starts.
New figures from the HUD and Commerce Department show that June’s housing starts were down 12.3% to a seasonally adjusted annualized rate of 1.17 million units.
Single-family starts dropped 9.1% to 858,000 units while the multi-family sector slumped 19.8% to 315,000 units.
The National Association of Home Builders says it’s not surprising that builders have cut back on production.
“We have been warning the administration for months that the ongoing increases in lumber prices stemming from both the tariffs and profiteering this year are having a strong impact on builders’ ability to meet growing consumer demand,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “This is why we continue to urge senior officials to take leadership and resolve this issue.”
Permits down to the lowest of the year
There was also a decline in the issuance of building permits which dropped 2.2% to 1.27 million units in June, the lowest so far in 2018.
Single-family permits rose 0.8% but the 850,000 reading is the second lowest of the year says NAHB. Multi-family permits were down 7.6% to 423,000.
“The concern over material costs, especially lumber, is making it more difficult to build homes at competitive price points, particularly for newcomers entering the housing market. Moreover, the soft permit report does not suggest a significant increase in housing production in the near term,” said NAHB Senior Economist Michael Neal. “However, consumer demand for single-family housing continues to increase as the overall economy and labor market strengthen.”
Is there any good news?
First American chief economist Mark Fleming says that there are some positives in the data.
These include a rise in the number of completions and the growth in the construction labor force.
“The pace of housing completions, at a 1.26 million seasonally adjusted annualized rate (SAAR), is particularly important as it measures new supply that can immediately help offset current housing shortages. The continued year-over-year growth in completions means more homes on the market in the short-term,” Fleming said.
Meanwhile, LendingTree chief economist Tendayi Kapfidze also has a positive take on the data.
“The data is quite choppy and best viewed as a moving average to smooth out volatility. LendingTree prefers the 3-month average to balance timeliness with information value. The 3-month average of single-family starts was 900,000, still one of the strongest readings over the past year,” he says.
