Overall residential construction starts were elevated 3% in June at a seasonally adjusted annual rate of 1.35 million units according to new data from the U.S. Department of Housing and Urban Development. The reading of 1.35 million represents the number of units that would begin if builders kept the same pace for 12 months.
Behind this slight rise from May’s residential construction numbers is mostly multifamily starts, having increased 19.6% to an annualized 373,000 pace in June. Single family starts, in contrast, remain on the downtrend, descending 2.2% from May’s revised 980,000 to eight month lows.
On a year-to-date (YTD) basis, this sets single family starts up 16.1%. Permits for single family homes, however, have also dropped 2.3% to 934,000, reaching one year lows and signaling still waning demand for future home construction.
Aggressive rates for residential construction and mortgages are still dogging both builders and prospective homebuyers alike with most of the homebuilding demand in June still coming from a resounding lack of inventory of pre-existing homes as homeowners hold onto lower payments for their homes.
This shortage has largely helped push housing prices ever higher despite the fact that demand remains near twenty-five year lows.
Lightapalooza took place in late February, and the growth of the event has mirrored the rapid ascension lighting fixtures and controls.
Economists have more broadly begun to price in potential rate cuts, however, following reports that the economy is now starting to slow as hoped for by the fed.
“With better inflation data, the Federal Reserve is expected to begin rate reductions later this year, and an improving interest rate environment will help buyers as well as builders and developers who are contending with tight lending conditions and high interest rates,” noted NAHB Chief Economist Robert Dietz in a press release discussing the state of the market.
The rate on the 30-year fixed-rate mortgage averaged 6.89% last week, having dropped from a six-month high of 7.22% in May, data from mortgage agency Freddie Mac showed.
However, the rising unemployment amidst macroeconomic factors like the upcoming presidential election, as well as growing trade pressure against China, has pushed the broader market into a state of concern regarding the possibility of a recession.
According to Reuters, economists have already begun to theorize that lowering interest rates will be a “mixed blessing” for homebuilders as lower rates free up construction while rising unemployment shrinks the prospective buyer pool.
While the residential construction backlog rose 1.8% to 277,000 units in June, the number of houses completed shot up 10.1% to a rate of 1.710 million units. This is the highest rate since January 2007, with realtors stating that completions would need to maintain slightly below this rate for the next 12 months in order to bridge the current inventory gap.
Single family homes under construction fell back 1.3% to 668,000 and down 2.2% YTD. Meanwhile, multifamily units currently under construction fell yet again, declining 1.6% to 895,000—down 11.4% YTD.
Residential construction in the Northeast was by far the slowest in June, dropping 9.9% YTD, with the Midwest and South experiencing 3.4% and 3.5% drops respectively. Only the West saw a rise in combined starts, rising a meager 0.7% YTD.
Despite this, homebuilders have buoyed expectations for sales given the current prospect of rate cuts, as well as the slim 4.4 months’ worth of home inventory driving demand for increased home production.
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