Housing starts and permits both rose in July but the rising cost of materials, exacerbated by tariffs and the threat of trade wars, could stand in the way of the market potential.
The newly-released HUD and Commerce Department figures for July show housing starts rose 0.9% to a seasonally adjusted annual rate of 1.17 million units.
Multifamily starts saw a 3% increase to a SAAR of 306,000 while single-family starts were up 0.9% to a SAAR of 862,000.
But the share of single-family projects authorized but not started rose 25% year-over-year as the cost of materials delayed developments according to the National Association of Home Builders.
“Supply-side challenges including increases in material prices and chronic labor shortages are affecting affordability in many markets,” said NAHB Chief Economist Robert Dietz. “However, consumer demand remains strong due to a growing economy and job market and favorable demographics. Moreover, on a year-to-date basis, single-family construction has shown steady progress, up 7.2%, while 5+ multifamily production is up 3.4% as well.”
Permits gain, outlook positive
Overall permits rose 1.5% to 1.31 million units in July with single-family permits posting a 1.9% gain to 869,000 while multifamily permits were relatively unchanged, up 1.7% to 410,000.
Mark Fleming, chief economist at First American is optimistic.
“The increase in permits is a welcome sign as a strong economy with continuing job and income growth, millennials ageing into homeownership, and baby boomers living longer and more independently than ever, will continue to drive demand and keep the pressure up on the housing market,” he said.
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