Housing starts climb in July

Housing starts moved forward in July to a seasonally adjusted annual rate of 1.452 million.  

This is a 3.9%  increase above the revised June estimate of 1.398 million starts. The latest report, released this morning by the U.S. Census Bureau and the Department of Housing and Urban Development, is also 5.9% above the July 2022 rate of 1.371 million.

Single‐family housing starts increased 6.7% to 983,000 in July compared to the revised June figure of 921,000. 

The July rate for units in buildings with five units or more was 460,000, breaking even with the previous month’s figure. On a year-over-year basis, multifamily starts moved ahead just 0.4% from a rate of 458,000 in July 2022.

According to the National Association of Home Builders (NAHB), a lack of existing inventory and solid buyer demand has helped offset rising mortgage rates and push single-family production higher. Builders continue to grapple with elevated construction and financing costs as well as a lack of skilled labor, however.

"With many homeowners choosing to stay in their existing home to preserve their low mortgage rate, demand for new home construction pushed up single-family starts in July even as builders continue to struggle with increased uncertainty stemming from rising rates,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “Builder sentiment has shown that higher mortgage rates are contributing to a decline in buyer traffic, and rates need to stabilize to prevent the housing market from slowing.”

The latest NAHB/Wells Fargo Housing Market Index (HMI), released yesterday, saw builder confidence decrease by 5 points in August after seeing gradual improvement over the past several months. The NAHB attributed the decline to mortgage rates that continue to rise and are approaching nearly 7%. 

Total housing permits in July were nearly flat, inching forward just 0.1% to 1.442 million from the revised June rate of 1.441 million.

But compared to the July 2022 rate of 1.658 million, overall permits dropped 13%. 

"Total permits declined 13% compared to a year ago, indicating that builders are slowing construction activity as housing costs rise,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “In fact, multifamily permits are at their lowest three-month moving average since December 2020, another sign that the market is cooling. In order to bring down shelter inflation, which accounted for 90% of the overall inflation rate last month, we need to enact policies that will allow builders to boost the nation’s housing supply.”

Authorizations of units in buildings with five units or more were at a rate of 464,000 in July, slipping by 0.2% from a rate of 465,000 in the prior month. Year-over-year, permits for building with five or more units plummeted by 32.2%.

Single‐family permits were at a rate of 930,000, which is just 0.6% above the revised June figure of 924,000. This is also a 1.3% increase from the July 2022 figure of 918,000.