New construction plummeted in July, further depleting housing supply
Construction activity for new U.S. homes decreased sharply in July, and the number of permits issued for new building projects also fell as higher mortgage rates and supply chain problems continued to drive what lawmakers are calling a national housing crisis.
Seasonally adjusted housing starts dropped 9.6 percent to 1.45 million units in July from nearly 1.6 million in June, a decrease of 8.1 percent since July of last year, the Census Bureau and the Department of Housing and Urban Development reported Tuesday.
Housing starts missed expectations by 6.1 percent, according to a Reuters poll of economists, which put the number at 1.54 million units.
Permits for single‐family homes dropped 4.3 percent in July to 928,000 from 970,000 in June. Building permits overall slipped 1.3 percent to 1.67 million from a June figure of nearly 1.7 million.
Confidence among home builders fell for the eighth straight month in August, the National Association of Home Builders (NAHB) reported Monday, leading the group to declare a “housing recession.”
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” Robert Dietz, chief economist at the NAHB, said in a Monday statement.
Interest rate hikes from the Federal Reserve began in March, intended to fight inflation that has risen to 40-year highs in the wake of massive private-sector shutdowns caused by the pandemic. Interest rates for banks are now between 2.25 and 2.5 percent and are expected to rise to 3.5 percent by the end of the year.
The standard 30-year fixed-rate mortgage now stands at 5.22 percent, off a June high of 5.81 percent. The last time mortgage rates were above 5 percent was 2011.
Lawmakers have been sounding the alarm about shortages in the nation’s housing supply, which government lender Freddie Mac puts at 3.8 million units, although other studies say that number is higher.
“I feel like painting a big ‘supply’ message across maybe one of the avenues out here. It’s just supply. Or it’s supply, stupid,” Sen. Maria Cantwell (D-Wash.) said during a meeting of the Senate Finance Committee on affordable housing in July. “It’s really just about supply.”