Residential construction in the United States rebounded less than expected in May as very expensive lumber and shortages of other materials continued to constrain builders’ ability to take advantage of an acute shortage of homes on the market. .
Wednesday’s Commerce Department report also showed permits for future home construction fell to their lowest level in seven months. Housing completions have also declined as the number of dwellings approved for construction but not yet started has reached its highest level since 1999, indicating that supply is likely to remain limited for some time and stimulate price inflation in the housing market. housing.
“Shortages of materials and labor are making it difficult for builders to increase production of new homes, although demand remains strong,” said Robert Frick, business economist at the Navy Federal Credit Union in Vienna, Virginia. “Prospective buyers should expect tight inventories and higher prices for new and existing homes for the foreseeable future.”
Housing starts rose 3.6% to a seasonally adjusted annual rate of 1.572 million units last month. Data for April has been revised downward to a rate of 1.517 million units from the previously reported 1.569 million units.
Revolutionary activity increased in the densely populated Midwest, West and South, but declined in the Northeast.
Economists polled by the Reuters news agency predicted housing starts to rise at a rate of 1.630 million units. Last month’s increase still left housing starts below the March rate of 1.725 million units, which was the highest level since June 2006. Housing starts, however, jumped 50.3 % year-on-year in May.
Although lumber prices fell from a record high reached in early May, softwood lumber prices rose 154.3% year-on-year in May, according to the latest producer price data.
A National Association of Home Builders poll on Tuesday showed that builder confidence of single-family homes fell to its lowest level in 10 months in June.
The NAHB blamed the weakening sentiment on “rising costs and declining availability of softwood lumber and other building materials,” noting that this pushed up new home prices “which slowed down the sustained pace of house construction ”.
Tariffs on steel imports also increase construction costs.
US stocks opened lower as investors waited for indications from the Federal Reserve on when it would begin to scale back its massive bond-buying program. The dollar remained stable against a basket of currencies. US Treasury prices have gone up.
Boom in demand
The demand for larger, more expensive housing amid the COVID-19 pandemic, which has left millions of Americans working from home, is driving the housing market boom. But supply is tight, with the inventory of second-hand homes nearing record lows.
Permits for future housing construction fell 3.0% to a rate of 1.681 million units in May. Building permits jumped 34.9% from May 2020. They are slightly ahead of housing starts, suggesting moderate gains in home construction in the coming months.
Single-family home construction, the largest share of the housing market, rose 4.2% to a rate of 1.098 million units in May.
Building permits for single-family homes fell 1.6% to a rate of 1.130 million units. The number of homes allowed to be built but not started rose 0.8% to a rate of 238,000 at the end of May, the highest since the government began tracking the series in January 1999.
The housing market has been the main player in the economic recovery following the COVID-19 recession, which began in February 2020. Investment in residential construction has seen double-digit growth since the third quarter of the year last. Most economists expect housing to have a neutral impact on gross domestic product growth in the second quarter.
Housing starts in the volatile multi-family housing segment rose 2.4% to 474,000 units in May. Building permits for multi-family housing projects fell 5.8% to a rate of 551,000 units. With millions of Americans vaccinated against COVID-19 and the economy reopening, people are returning to cities.
Home completions fell 4.1% to a rate of 1.368 million units last month. Single-family home completions fell 2.6 percent to a rate of 978,000 units.
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.
The housing stock under construction rose 0.5% to a rate of 1.324 million units last month.