New-home construction for single-family homes saw an improvement in July, despite builders’ concerns about affordability headwinds. Single-family housing starts rose 1.3% to 876,000 units last month, the Commerce Department reported. The largest regional increases in single-family homebuilding last month occurred in the South.
But a decline last month in multifamily production for condos and apartments led to an overall decrease in total housing starts by 4% in July. That marked the third consecutive month for overall decreases on the Commerce Department’s index. Still, “builders remain confident about the market, and this is reflected in recent modest gains in single-family starts,” says Greg Ugalde, chairman of the National Association of Home Builders.
Lower mortgage rates have been a hopeful sign for homebuilders and buyers in recent weeks. Builders have skewed toward constructing in the upper price brackets in recent years due to rising costs for labor and lots. “Permits bottomed out in April, and single-family starts hit their low point in May—and now we are starting to see the gradual improvement in the market that we've been forecasting,” says NAHB Chief Economist Robert Dietz.
The NAHB reported last week that its builder confidence survey of new single-family homes rose in August and that demand for homes at lower price points remains strong. Indeed, housing permits, a gauge of future production, rose 8.4% to 1.34 million units in July. Single-family permits rose 1.8%, and multifamily permits surged 21.8%. Permits saw the biggest increases in the Northeast, rising 2.4%, while falling by 7.1% in the Midwest, 0.1% in the South, and 6.8% in the West.
Source: National Association of Home Builders and “U.S. Housing Starts Drop for the Third Straight Month,” Reuters (Aug. 16, 2019)
