Housing starts increased in July, driven mainly by a surge in single-family construction, as builders continued to step up production in an effort to meet fierce demand.
Starts were at a seasonally adjusted annual rate of 1.452 million, according to the U.S. Census Bureau, up 3.9% compared with June and up 5.9% compared with July 2022.
Starts of single‐family homes in July were at a rate of about 983,000, an increase of 6.7% compared with June.
Starts of multifamily dwellings (five units or more per building) were at a rate of about 460,000, flat compared with the previous month.
Building permits, however, were lackluster. They were at a seasonally adjusted annual rate of 1,442 million, an increase of 0.1% compared with June but down 13.0% compared with July 2022.
Permits for single-family homes were at a rate of 930,000, an increase of 0.6% compared with June.
Permits for multifamily units were at a rate of 464,000, down 0.2% compared with the month prior.
Housing completions were at a seasonally adjusted annual rate of 1.321 million, down 11.8% compared with June and down 5.4% compared with July 2022.
“With many home owners choosing to stay in their existing home to preserve their low mortgage rate, demand for new home construction pushed up single-family starts in July even as builders continue to struggle with increased uncertainty stemming from rising rates,” says Alicia Huey, chairman of the National Association of Home Builders (NAHB), in a statement. “Builder sentiment has shown that higher mortgage rates are contributing to a decline in buyer traffic, and rates need to stabilize to prevent the housing market from slowing.”
“Total permits declined 13 percent compared to a year ago, indicating that builders are slowing construction activity as housing costs rise,” adds Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis for NAHB. “In fact, multifamily permits are at their lowest three-month moving average since December 2020, another sign that the market is cooling. In order to bring down shelter inflation, which accounted for 90% of the overall inflation rate last month, we need to enact policies that will allow builders to boost the nation’s housing supply.”
Odeta Kushi, deputy chief economist for First American, points out that “builder sentiment dipped in August, after rising for seven consecutive months.”
“There remains pent-up demand in the housing market, but with mortgage rates approaching 7 percent, potential home buyers are feeling the pinch of declining affordability,” Kushi says in a statement. “Yet, despite the mortgage rate increase in July, single-family housing starts picked up, and permits increased to the highest level since June 2022, a sign of cautious builder optimism.”
“Demographic tailwinds from millennials continuing to age into their prime home-buying years and a lack of existing-home inventory means that new-home construction is essential in meeting shelter demand,” Kushi says.
Photo: Annie Gray