Housing starts nosedive 12.3% in June to nine-month low

ConDig (19-Jul-18). Construction of new homes in the US plunged 12.3% in June to a nine-month low and permits sank for a third straight month, indicating a softening in the market amid an increase in material costs.

Total housing starts crumbled to a seasonally adjusted annual rate of 1.17 million compared with a revised down total of 1.337 million the month prior instead of a previously reported 1.350 million-unit rate, according to latest Commerce Department figures.

Construction permits, which are a sign of future construction activity, dropped 2.2% to 1.27 million units in June, the lowest level of the year. Although single-family permits edged up 0.8% to 850,000, they remain at their second lowest reading this year. Multifamily permits fell 7.6% to 423,000.

“We have been warning the administration for months that the ongoing increases in lumber prices stemming from both the tariffs and profiteering this year are having a strong impact on builders’ ability to meet growing consumer demand,” said National Association of Home Builders  (NAHB) chairman Randy Noel.

“This is why we continue to urge senior officials to take leadership and resolve this issue.”

The drop in overall starts come as single-family starts fell 9.1% to 858,000 units, while multifamily sector, which includes apartment buildings and condos, dropped 19.8% to 315,000.

Leaders of the homebuilding industry continue to warn about the rise in material costs, which has been exacerbated follow a decision by President Trump to slap a 25% tariff on imported steel and a 10% duty on foreign aluminum from Canada, Mexico and the European Union on May 31.

“The concern over material costs, especially lumber, is making it more difficult to build homes at competitive price points, particularly for newcomers entering the housing market. Moreover, the soft permit report does not suggest a significant increase in housing production in the near term,” said NAHB senior economist Michael Neal.

“However, consumer demand for single-family housing continues to increase as the overall economy and labor market strengthen.”

The drop in starts follow a report earlier this week that showed US homebuilder confidence remained unchanged in July. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) held at 68 in July, while the index measuring current sales conditions also remained unchanged at 74.

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