Fall in housing starts in the United States; permits hit their lowest level in a year as shortages are felt
- Housing starts fell 1.6% in September; August revised downwards
- Single-family home starts unchanged; 5.0% multi-family drop
- Building permits fall 7.7%; 0.9% drop in single-parent families
WASHINGTON, Oct. 19 (Reuters) – U.S. housing construction fell unexpectedly in September and permits fell to their lowest level in a year amid acute shortages of raw materials and labor ‘work, reinforcing expectations of a sharp slowdown in economic growth in the third quarter.
Tuesday’s Commerce Department report also showed home completions hitting a 13-month low. This follows Monday’s announcement that production at U.S. factories fell the most in seven months in September. Strong demand as global economies emerge from the COVID-19 pandemic is facing labor shortages, straining supply chains.
In the United States, all industries are experiencing shortages, fueling inflation.
“Demand dynamics still look positive,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York. “But supply is struggling to catch up given higher input costs and shortages that remain headwinds for builders.”
Housing starts fell 1.6% to a seasonally adjusted annual rate of 1.555 million units last month, the lowest level since April. Data for August has been revised down to a rate of 1.580 million units from 1.615 million units previously reported.
Economists polled by Reuters had predicted that housing starts would rise at a rate of 1.620 million units. Lumber prices are on the rise again after falling from their record highs in May. Building materials, such as windows and electrical circuit breakers, are scarce. The pandemic has changed the dynamics of the labor market.
Housing starts fell from the 1.725 million unit pace level recorded in March, which was more of a 14-and-a-half-year high.
Single-family home starts, which account for the largest share of the housing market, were unchanged at a rate of 1.080 million units last month. Single-detached home starts fell in the Northeast and the densely populated South, but rose in the West and Midwest.
Starts of buildings with five or more units fell 5.1% to 467,000 units last month.
A survey by the National Association of Home Builders on Monday showed that builders’ confidence of single-family homes rose again in October, but noted that “builders continue to face ongoing supply chain disruptions and shortages of labor that delay completion times “.
DELAY IN COMPLETION
Residential investment contracted in the second quarter after three consecutive quarters of double-digit growth. It probably declined further in the last quarter. The Atlanta Federal Reserve estimates that gross domestic product growth slowed to an annualized rate of 1.2% in the last quarter. The economy grew at a pace of 6.7% in the second quarter.
The housing market was boosted at the start of the coronavirus pandemic by an exodus from cities to suburbs and other low-density locations as Americans sought more spacious housing for home offices and online education .
That tailwind fades as workers return to offices and schools reopened for in-person learning, thanks to COVID-19 vaccinations. High inflation also pushes up mortgage rates.
The 30-year fixed mortgage rate rose to an average of 3.05% last week, from 2.99% the week before, according to data from mortgage giant Freddie Mac. While still low by historical standards, rising borrowing costs may make homeownership less affordable for some first-time homebuyers. House prices registered double-digit growth on an annual basis in July.
Permits for future housing construction plunged 7.7% to a rate of 1.589 million units in September. Single-family home permits fell 0.9% to a rate of 1.041 million units. Permits for buildings with five or more units fell 21.0% to a rate of 498,000 units.
Home completions fell 4.6% to a rate of 1.240 million units last month. Single-family home completions were unchanged at a rate of 953,000 units. The pandemic has lengthened the time between the issuance of a permit for the construction of single-family homes and completion, which economists attribute to supply constraints.
Used home inventory is near its all-time low, leading to record double-digit annual home price growth.
Realtors estimate that housing starts and completion rates for single-family homes need to be between 1.5 million and 1.6 million units per month to close the inventory gap.
Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.