U.S. housing growth rose less than expected in May as very expensive wood and other materials shortages continued to reduce builders ’ability to take advantage of the severe housing shortage in the market.
A report by the U.S. Department of Commerce on Wednesday shows that permits to build future homes have also dropped to a seven-month low. Housing completion has also fallen as the number of homes allowed to be built but not yet started has risen to a record high since 1999, with supply likely to tighten and drive up house price inflation.
“Building materials and crafts are struggling to increase production in new homes, even as demand remains strong,” said Robert Frick, a corporate economist at the Navy Federal Credit Union in Vienna, Virginia. “Potential home buyers should expect tight inventories and rising prices for a new future for both new homes and the future.”
Home starts rose 3.6% to a seasonal adjusted annual rate of 1.572 million units last month. April data were revised up to a rate of 1,517 million units from the previously reported 1,569 million units.
Innovative action increased in the Midwest, the West, and the densely populated South, but declined in the Northeast.
Economists surveyed by the Reuters news agency predicted that the rate of 1.630 million units would start to increase. Growth last month still begins below the March 1.725 million unit rate, which was the highest level since June 2006. The start of construction, however, rose by 50.3% year-on-year in May.
Although wood prices fell from a record in early May, softwood prices rose by 154.3 per cent year-on-year in May, according to recent producer price data.
According to a survey by the National Association of Home Builders on Tuesday, confidence in single-family homeowners fell to a 10-month low in June.
The NAHB blamed the decline in sentiment for “higher costs and reduced availability of softwood lumber and other building materials,” warning that the prices of new homes were rising, “which has slowed the pace of housing construction.”
Tariffs on steel imports are increasing construction costs.
U.S. stocks opened lower as investors waited for Federal Reserve notes when the massive bond purchase program began to decline. The dollar was stable against a basket of currencies. U.S. Treasury prices rose.
Demanding larger and more expensive accommodations In the midst of the COVID-19 pandemic, millions of Americans are still pushing for the rise of the housing market that has left them working from home. But supply is tight, with an inventory of pre-existing homes next to record lows.
Permits to build future homes fell by 3.0% in May to a rate of 1.681 billion units. Building permits were up 34.9 percent from May 2020. They go a little further from the start, suggesting moderate gains in home construction in previous months.
Single-family housing, the largest share of the housing market, rose 4.2 percent in May to 1,098 million units.
Permits to build single-family homes fell 1.6 percent to a rate of 1,130 million units. The number of homes that have been allowed to build but not started has risen by 0.8% to a rate of 238,000 at the end of May, which is since the government began monitoring the series in January 1999.
The housing market, which began in February 2020, has been the main star in the recovery of the COVID-19 economy. Investment in residential construction has seen double-digit growth since the third quarter of last year. Most economists expect housing to have a neutral impact on gross domestic product growth in the second quarter.
The beginnings of the volatile multi-family segment rose 2.4% in May to a rate of 474,000 units. Building permits for multi-family housing projects fell 5.8 percent to a rate of 551,000 units. With millions of Americans vaccinated against COVID-19 and the reopening of the economy, people are returning to cities.
Home completion fell 4.1% to 1.368 million units last month. Completion of single-family homes fell by 2.6% to a rate of 978,000 units.
Real estate agents have estimated that start-up and completion rates for single-family homes should range from 1.5 million to 1.6 million units per month to close the inventory gap.
The number of homes under construction rose by 0.5% in the last month to a rate of 1.324 million units.