The increase in housing starts is a welcome gift, but experts say builders aren’t yet betting recent improvements in materials costs are here to stay for the long term.

New residential construction made modest gains in June, as lumber prices finally began to settle back down to Earth, according to the U.S. Census Bureau and Department of Housing and Urban Development’s (HUD) latest new residential construction report.

Single-family housing starts in June were up 6.3 percent from May’s revised figure to a rate of 1,160,000. That rate was also up 29.1 percent from June 2020’s rate of 1,273,000.

Privately owned housing starts also rose 6.3 percent in June from the previous month to a seasonally adjusted annual rate of 1,643,000. Likewise, that figure was up 29.1 percent year over year.

Single-family building permits were down 6.3 percent from May to a seasonally adjusted annual rate of 1,063,000. Privately owned housing unit permits also declined 5.1 percent from May to 1,598,000.

Meanwhile, housing completions also saw a drop from May — single-family housing completions were at a seasonally adjusted annual rate of 902,000, 6.1 percent below May’s revised estimate of 961,000. Privately-owned housing completions only declined 1.4 percent from May’s revised estimate of 1,343,000 to 1,324,000. Senior Economist George Ratiu suggested that June’s new residential construction figures reflected builders’ conflicted feelings over whether or not to ramp up production, now that materials cost and availability are less dire than in recent months, or whether they should take a more tempered approach and wait to be certain that costs will continue to stabilize.

“In June, the pace of new construction reflected recent homebuilder uncertainty, as declining costs for materials like lumber have yet to translate into builders’ production plans,” Ratiu said in a statement. “As the industry looks beyond the COVID pandemic, builders are grappling with whether to ramp up inventory and pass lower prices to consumers, or take advantage of the current opportunity to offset last year’s setbacks by boosting profit margins.”

“In other words, builders aren’t hedging long-term plans on short-term improvements after the past year of pandemic challenges,” Ratiu added. “As factors like materials costs stabilize over the next three months, buyers may start to see some inventory and price relief in the new construction market.”

Email Lillian Dickerson

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