The pace of US home construction fell a sharp 4 per cent in July despite strong demand from would-be buyers, held back by a shortage of skilled labor and affordable land.
The Commerce Department said Friday that housing starts slipped last month to a seasonally adjusted annual rate of 1.19 million units. So far this year, housing starts have declined 3.1 per cent.
Though there was a slight 1.3 per cent uptick in the construction of single-family homes last month, the gain was offset by a 17.2 per cent plunge in the apartment category.
The construction slowdown, which has persisted all year, is thwarting prospective homebuyers. The solid job market and falling mortgage rates have boosted interest among people seeking homes, yet the shortage of available homes and rising prices have dampened sales.
The slowdown in construction, which in turn contributes to the scarcity of available housing, may contribute to a weakening of the overall economy.
Robert Frick, corporate economist at the Navy Federal Credit Union said that July's report showed that low mortgage rates were not enough to pull the US homebuilding market out of its slump.
The average rate on a 30-year fixed mortgage is just 3.6 per cent, according to Freddie Mac, its lowest level since November 2016.
"A dearth of cheap lots and persistent labour shortages are constraining builders, especially for homes costing less than USD 300,000, which have the greatest demand," Frick said.
In July, home construction fell across the Northeast, Midwest and South. It rose 1.3 per cent in the West, where home construction has fallen by 12.3 per cent this year.
Friday's construction report suggests that homebuilders may begin focusing more on the rental market.
Applications for housing permits, an indicator of future construction, rose 8.4 per cent, and apartment complexes accounted for most of the increase.
Disclaimer: No Business Standard Journalist was involved in creation of this content
