June’s housing starts report was heralded as “welcome news” by National Association of Realtors (NAR) Chief Economist Lawrence Yun, who said increasing residential construction was the key to lowering home prices.
This month, however, housing starts have taken a turn for the worse.
According to the U.S. Department of Housing and Urban Development, July privately-owned housing permits were at a seasonally adjusted rate of 1,223,000 — a 4.1 percent month-over-month decrease from June’s revised rate of 1,275,000, and a 4.1 percent year-over-year increase from the July 2016 rate of 1,175,000.
Single-family housing permits were at a rate of 811,000 — unchanged from June.
Construction starts suffered a blow as well. Privately-owned housing starts experienced a 4.8 percent month-over-month and 5.6 percent year-over-year decrease to a seasonally adjusted rate of 1,155,000.
Single-family housing starts decreased 0.5 percent month-over-month to a rate of 856,000.
Lastly, privately-owned housing completions dipped 6.2 percent month-over-month to 1,175,000 — but are still 8.2 percent higher than last year. Single-family completions were at a rate of 814,000 — 1.6 percent below June’s rate of 827,000.
Yun says the housing shortage and its effects will only “intensify” if builders don’t ramp up construction.
“The housing shortage in America will intensify if new construction remains as lackluster as it was in July,” Yun said in a blog post. “The softening multifamily housing starts brought down the overall new housing unit additions to the second lowest monthly activity this year.
“Moreover, the latest 15 percent drop in multifamily housing starts and 0.5 prcent drop in single family starts will hold back economic growth potential,” he added. “Because of this continued shortage, expect rents and home prices to rise by at least twice as fast as the broad consumer price index.”
About the report
Metrics from the New Residential Construction report measure new, privately owned housing units, excluding manufactured (mobile) homes. The U.S. Census Bureau and the United States Department of Housing and Urban Development (HUD) collect the data from the Building Permits Survey and from the Survey of Construction, which is partially funded by HUD.
The Building Permits Survey produces estimates of the number of permits issued for new housing units based on a mail survey of a sample of permit offices.
The Survey of Construction produces monthly estimates of housing starts and completions; Census Bureau field representatives sample individual permits within a sample of permit offices and then interview the builders or owners who took out the sampled permits to obtain start and completion dates, as well as sale dates and characteristics, such as size and number of bedrooms.
Field representatives also drive roads looking for new residential construction activity in land areas where building permits are not required.