Single-family home starts increased by 15.8% in August Future single-family home construction permits increased by 2.8%
WASHINGTON, Sept 18 (Reuters) – U.S. single-family home construction rebounded sharply in August, but modest increases in building permits are likely to maintain momentum as the market’s supply of new homes increases. It suggests that there is no.
The sharp increase in single-family housing starts announced Wednesday by the U.S. Department of Commerce likely reflects the fading effects of Hurricane Beryl, which depressed housing construction in the South. Home builders could face challenges with a growing inventory of existing homes for sale after the Federal Reserve cut interest rates by 50 basis points on Wednesday, the first rate cut since 2020. There is also.
Most homeowners had mortgage rates below 4%, and rising interest rates deterred many from listing their homes. The so-called “rate lock” has dried up supply in the housing market, creating an opportunity for builders.
“It appears that home builders have reacted too aggressively to the modest increase in new home sales in 2023, leaving them with excess inventory, leading to a decline in single-family construction activity in the coming months,” Oliver said. There is a high possibility that it will fall again.” Mr. Allen is a senior U.S. economist at Pantheon Macroeconomics. “Lower mortgage rates will boost last-minute demand for new housing.”
Single-family housing starts, which account for the bulk of housing construction, rose at a seasonally adjusted annual rate of 15.8% to 992,000 units last month, according to the Commerce Department’s Census Bureau. The number of single-family housing starts increased by 5.2% from the previous year.
Future construction permits for single-family homes increased by 2.8% to 967,000 units. Compared to the previous year, it decreased by 0.5%.
The number of single-family homes built fell for the fifth straight month as a spring spike in mortgage rates suppressed home sales and created an oversupply of new homes.
A survey released Tuesday by the National Association of Home Builders showed that homebuilder sentiment improved slightly in September after four consecutive months of declines, but that “a ‘lock-in’ effect on mortgage rates remains “Home builders will face competition from increasing existing home inventories in many markets as mortgage rates weaken and lower mortgage rates.” ”
Mortgage interest rates have fallen to the lowest level in a year and a half. New housing supply is close to early 2008 levels, with monthly supply above the 2018-2019 average.
However, the increase in supply has been uneven, and affordability remains a constraint that will not be alleviated by lower mortgage rates.
Mortgage lender Fannie Mae’s Economic Strategy Research Group said Wednesday that most of the increase in homes sold occurred in the Sunbelt and Mountain West regions, which have seen some of the strongest home price growth in recent years. , noted that there was also strong growth in house prices. construction of a new house.
The group said this has caused both a significant shock to relative affordability in these states and increased competition for sales of existing homes from new construction.
“Mortgage rates have fallen significantly in recent weeks, but there is no evidence of a corresponding increase in loan application activity and consumer homebuying sentiment has declined,” said Doug Duncan, Fannie Mae’s chief economist. It hasn’t improved.” .
“We expect affordability to remain the primary constraint on housing activity for the foreseeable future,” Duncan added.
In the densely populated southern region, the number of single-family home construction starts reached 18.9%, with activity likely being squeezed by the impact of Hurricane Beryl in July. Construction starts rose 47.4% in the Northeast and 11.6% in the Midwest, considered the most affordable region. In the West, housing construction rose 2.8%.
Stocks on Wall Street rose in response to the US central bank’s interest rate decision. The dollar fell against a basket of currencies. U.S. Treasury yields fell following the announcement.
Housing has a negative impact on the economy
Construction starts for housing projects with five or more units fell 6.7% to 333,000 units in August. Overall housing starts increased by 9.6% to 1.356 million units. Economists polled by Reuters had predicted that sales would rise to 1.31 million units. The number of housing starts increased by 3.9% from the previous year.
The number of condominium building permits increased by 8.4% to 451,000 units. Overall building permits increased by 4.9% to 1.475 million units. Compared to the previous year, it was down 6.5%.
Economists predicted the housing market would continue to weigh on economic growth in the third quarter, with the decline continuing into the final three months of the year.
“In the single-family market, sales have been reasonably strong, but inventories have increased significantly,” said Abiel Reinhart, an economist at JPMorgan. “Builders may prefer to keep starts low for a while to clear this inventory. Lower mortgage rates may also help reduce single-family inventory through strong sales. , there is little room for improvement in sales in the new home market.
Last month, the number of unbuilt homes approved for construction rose 1.4% to 285,000. The construction balance of single-family homes increased by 2.8% to 148,000 units, the highest level since April 2020. The completion rate for the housing sector decreased by 5.6% to 1,029,000 units.
Overall housing completions increased by 9.2% to 1.788 million units. The number of housing units under construction decreased by 1.9% to 1.509 million units, the lowest level since November 2021.
The inventory of single-family homes under construction decreased by 0.3% to 642,000 units.
“New construction projects are not going to return to the levels they were a few years ago,” said Veronica Clark, an economist at Citigroup. “This means total construction volume will decline as units under construction continue to be completed and not offset by the same number of new construction projects.”
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Report by Lucia Mutikani. Editing: Chizu Nomiyama, Will Dunham
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