US new home construction slows in July

WASHINGTON — As the US real estate market continues to see strong demand while grappling with supply bottlenecks and high prices, government data released on Wednesday showed the pace of new homebuilding slowing in July.

Housing projects started last month fell seven per cent compared to June to an annual rate of just over 1.5 million units, seasonally adjusted, the Commerce Department said, a drop far greater than economists had expected. 

Fueled by bargain borrowing rates, home prices have risen steadily for months, as a struggle to find workers and shortages of lumber and other goods has eroded builder confidence and prompted some to put projects on hold, according to an industry survey.

That was reflected in the government data that showed new single-family projects fell 4.5 per cent and construction started on apartments dropped 13.6 per cent.

The Northeast saw the steepest declines, plunging 49 per cent, while the South saw a small increase, according to the report.

"Solid housing demand and sparse inventory will give builders strong reasons to maintain solid levels of construction," said Oren Klachkin of Oxford Economics. "However, high materials prices, a limited supply of workers and limited land availability will constrain activity."

But new building permits issued in the month rose 2.6 per cent, breaking a string of declines and signaling more projects are in the pipeline.

Overall, housing starts are 2.5 per cent above the same level of 2020.

Mike Fratantoni, chief economist of the Mortgage Bankers Association, said homebuilding should pick up as supply chain struggles ease.

"There are now almost 690,000 single-family homes under construction — the largest number since 2007. This is clearly a positive sign given the remarkably low levels of inventory on the market," he said.