Privately-owned housing starts and privately-owned housing units authorized by building permits are both trending upwards, month-over-month, according to the latest new residential construction numbers from U.S. Census Bureau and the U.S. Department of Housing and Urban Development. The July data could be a positive sign that the inventory woes facing the industry are waning.

In the month of July, privately owned housing starts were at a seasonally adjusted rate of 1,168,000 – 0.9 percent above the June rate but 1.4 percent below the July 2017 rate. Privately-owned housing units authorized by building permits in July reached a seasonally adjusted annual rate of 1,311,00 – 1.5 percent above the June rate and 4.2 percent above the July 2017 rate.

Privately-owned housing completions in July were at a seasonally adjusted annual rate of 1,188,000, which is 1.7 percent below the June rate and 0.8 percent below the July 2017 rate. Single-family homes saw even fewer housing completions with a rate of 814,000 – 5.2 percent below the rate for June.

“While for sale inventory is still at historical lows, there has been an uptick in the last month or two, slightly easing supply constraints and perhaps providing more options for prospective buyers, ultimately hurting the builders,” said Scott Volling, principal at PricewaterhouseCoopers.

“Further, mortgage rates continue to tick upward and builders may be muting how aggressive they build based on internal projections of future shifts in demand,” Volling added. “June appeared to be an anomaly, but July results indicate a trend. With permits still fairly solid, we will need to see if the trend continues into the late summer/early fall or if recent permits translate to stronger starts in the coming months.”

Sam Khater, Freddie Mac’s chief economist said the slowdown of construction permits this year is worrisome.

“Single-family construction permits have grown 7.2% so far this year – compared to 10.0% last year – and the bulk of the slowdown has been in the South,” said Khater. “Given the chronic lack of affordable housing and rapidly escalating home prices, it is worrisome that on a per capita basis, the country is producing new single-family housing stock at a rate that is similar to the trough of a typical recession.”

Email Patrick Kearns

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