As of July 2024, U.S. homebuilding showed a significant slowdown. Housing starts were at a seasonally adjusted annual rate of 1.238 million, which is a 6.8% drop from June and 16% lower than the same period last year. Single-family housing starts were particularly affected, falling by 14.1% from June to July. Building permits, a forward-looking indicator, also declined by 4% from June to July, reaching an annual rate of 1.396 million. However, housing completions increased by 13.8% year-over-year to 1.529 million.
Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB): “The ongoing affordability crisis, stemming from high interest rates and rising home prices, continues to weigh on homebuilding, especially in the single-family sector.”
The U.S. single-family homebuilding sector experienced a significant downturn in July, hitting a 16-month low, driven by factors such as Hurricane Beryl’s impact and an oversupply of new homes. This marks the fifth straight month of decline in homebuilding, indicating ongoing struggles in the housing market as higher mortgage rates and prices continue to dampen sales.
Hurricane Beryl and excess inventory are putting pressure on US single-family homebuilding.#highered #CommunityColleges #EdTech #HurricaneBeryl #Homebuilding #HousingMarket #RealEstate #USEconomy #Housingmarket #Newhomes #Economyhttps://t.co/29lqTgjLVh
— Sounetu, LLC (@m_sounetu) August 16, 2024
The Commerce Department reported on Friday that single-family housing starts, which constitute the majority of homebuilding activities, fell by 14.1% to a seasonally adjusted annual rate of 851,000 units in July. This is the lowest level recorded since March 2023. The decline is attributed to an already strong supply of new homes and expectations of weak future sales, as builders grow increasingly hesitant to commit resources to new construction.
The South, particularly hard-hit by Hurricane Beryl in early July, saw homebuilding plummet by 22.9%. The Northeast also faced a steep decline of 27.1%. In contrast, the Midwest experienced a 16.8% increase in housing starts, while the West saw a modest dip of 1.4%. Overall, single-family housing starts were down 14.8% compared to the same period last year.
Despite a slight decrease in mortgage rates, which peaked at 7.22% in May and have since dropped to 6.45%, the demand for home loans has not seen a significant uptick. This has led to a surge in new housing inventory, reminiscent of levels last seen in early 2008. The National Association of Home Builders survey revealed that homebuilder sentiment fell to an eight-month low in August, citing challenging housing affordability conditions as a primary concern.
While there is some optimism for a rebound in construction and sales activity in the coming months, the current oversupply of homes in certain regions poses a substantial constraint. The overall housing starts, including multi-family units, dropped by 6.8% to 1.238 million units, the lowest since May 2020. Building permits, a forward-looking indicator of construction activity, also saw a decline, with single-family home permits slipping by 0.1% and multi-family permits dropping by 12.4%.
Construction of new homes slumps for 5th straight month despite drop in mortgage rates: US single-family homebuilding dropped to near a 1-1/2-year low in July due in part to Hurricane Beryl’s disruption of activity, but rising new housing supply could… https://t.co/NNQAjZTjQR pic.twitter.com/uy5xwlX9Fj
— Janie Johnson – America is Exceptional (@jjauthor) August 16, 2024
Quotes
- Ali Wolf, Chief Economist at Zonda:“Builders are pulling back on new projects due to uncertainty around demand, which is being influenced by rising mortgage rates and economic concerns.”
- Matthew Speakman, Senior Economist at Zillow: “Despite the recent slowdown, there remains strong underlying demand for housing, particularly in markets where inventory is still historically low.”
Key Points:
i. U.S. single-family homebuilding fell to a 16-month low in July, influenced by Hurricane Beryl and an oversupply of new houses.
ii. housing market remains subdued with a fifth consecutive monthly decline, reflecting weak demand due to high mortgage rates and prices.
iii. Housing starts in the South and Northeast saw significant declines, while the Midwest experienced a rise.
iv. Lower mortgage rates have not yet led to a strong recovery in home loan demand, despite expectations of a rebound in construction activity.
v. The overall housing starts in July reached the lowest level since May 2020, with building permits also dipping, indicating ongoing challenges in the housing market.
RM Tomi – Reprinted with permission of Whatfinger News
