U.S. housing starts are now at the lowest rate they have been since April 2023, continuing a summer decline to a seasonally adjusted annual rate of 1.23 million. This is the number of houses that would be started in a year if current construction rates were to be maintained. The July construction figure is 6.8% lower than the revised June estimate of 1.32 million and is 16% lower than July 2023 numbers.
This is the fifth straight monthly decline in homebuilding as reported by the U.S. Census Bureau and U.S. Department of Housing an Urban Development. The continued slowdown has largely been attributed to delays caused by Hurricane Beryl as well as the continued pressure of high mortgage rates and high prices.
A slowing labor market has also been identified by experts as a potential challenge towards recovery as more prospective buyers are expected to exit the market as unemployment rises.
Single family construction, which accounts for the bulk of homebuilding fell 14.1% to a seasonally adjust rate of 851,000 units in July, though single family starts remain up 11.4% compared to last year. Multifamily construction starts, in contrast, increased 14.5% to an annualized 387,000 pace.
According to Freddie Mac, as of August 15, 2024, the average 30-year fixed mortgage rate in the U.S. sits at 6.49% near 52-week lows. The drop is largely due to optimism for rate cuts that could potentially occur in September. However, it was no more than a couple months ago in May that rates were as high as 7.22%. Despite the drop, home loans have not seen a corresponding resurgence in response to the decrease in rates.
Lightapalooza took place in late February, and the growth of the event has mirrored the rapid ascension lighting fixtures and controls.
As it turns out, affordability across the broader market remains a huge concern for many, including homebuilders, who have responded to the expected slowdown fairly negatively, with the most National Association of Home Builders survey showcasing the fourth straight drop in homebuilder confidence in four months.
Even with new housing inventory levels rising to 2008 numbers, the cost of homes remains prohibitively expensive for the average American. According to a recent study from Zillow, the average U.S. household now needs to make an average of $106,500 a year in order to be able to comfortably afford a home, up from $59,000 back in 2020.
“While we do expect a rebound in construction and sales activity in August, we are a little perturbed that lower interest rates are not generating a bigger rally,” said Paul Ashworth, chief North America economist at Capital Economics as reported by Reuters.
“Even though lower interest rates should provide ongoing support to new home sales, the existing oversupply in some regional markets could be a bigger constraint than we previously anticipated.”
In July, the number of permits being taken out for construction dropped to 1.39 million from June’s rate of 1.45 million, a 4% monthly drop, and a 7% yearly drop compared to July 2023. Single family authorizations in July dropped a meager 0.1% to 938,000 while multifamily authorizations dropped 11.1% to 458,000.
Single-family homes under construction fell to 653,000—down 4.1% compared to a year ago—while the number of multifamily units under construction fell to 886,000 count—down 13.2% compared to a year ago.
Looking at regional data, housing starts in July were 1.3% lower in the Northeast, 5.1% lower in the Midwest, 5.4% lower in the South and 5.1% lower in the West.
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