U.S. homebuilding fell to a nine-month low in June and permits for construction declined for the third month in a row, dealing a huge blow to the housing market.
This huge drop in housing starts and permits, reported by the Commerce Department on Wednesday, suggested homebuilding could be caused by more expensive lumber, as well as land and labor shortages.
There’s pressure on both sides of the market, from increasingly expensive inputs on the supply side, to higher prices on the demand side, and the result is that neither builders nor buyers can keep up.
According to Reuters, housing starts fell 12.3% to a seasonally adjusted annual rate of 1.173 Million units last month, the lowest since September 2017.
Data for May show starts rising at 1.337 Million-unit rate instead of the forecasted 1.350 Million-unit rate. Starts fell in all four regions last month. Building permits tumbled 2.2% to rate of 1.273 Million units, the lowest level since September 2017. Single-family homebuilding, the largest share of the housing market, declined 9.1% to a rate of 858,000 units in June. Single-family homebuilding has lost its momentum since reaching 948,000 units last November, which was the strongest in more than 10 years. Starts for multi-family homes increased by 19.8% in June to a pace of 315,000 units.
The Trump administration in April 2017 imposed anti-subsidy duties on imports of lumber, which have increased the price of new single-family home. Mortgage rates have also risen even though they are still low by standards. The housing market is slowing overall economic growth, which accelerated in the second quarter after hitting a soft patch at the beginning of the year.