WASHINGTON: US homebuilding surged to a four-month high in June, but construction activity remains constrained by rising lumber prices and labour and land shortages. June’s better-than-expected increase in housing starts ended three straight months of declines, offering hope that investment in homebuilding was only a modest drag on economic growth in the second quarter.
“A lack of workers is limiting the ability of builders to build, and input costs are also an issue,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “I don’t expect this part of the economy to add greatly to growth going forward.”
Housing starts jumped 8.3 per cent to a seasonally adjusted annual rate of 1.22 million units, the highest level since February, as both single-family and multi-family construction rebounded after a recent slump, the Commerce Department said on Wednesday.
May’ s sales pace was revised up to 1.12 million units from the previously reported 1.09 million units.
Economists had forecast groundbreaking activity rising to a 1.16 million-unit rate last month. Starts rose 2.1 per cent on a year-on-year basis.
Building permits shot up 7.4 per cent to a 1.25 million-unit rate in June, with approvals for the single-family housing segment snapping a three-month losing streak. Permits for multi-family homes construction surged to a five-month high.
Despite last month’s surge, homebuilding has lost momentum after strong gains in both the fourth and first quarters.
Starts are below their historic average of 1.5 million, a rate realtors say would eliminate an acute shortage of houses on the market, which has driven up prices.
“We expect the bidding wars to continue for the foreseeable future in many inventory-starved housing markets,” said Joseph Kirchner, senior economist at Realtor.com.
Supply bottlenecks are blamed for the slowdown. A survey on Tuesday showed confidence among homebuilders hit an eight-month low in July amid complaints about high lumber prices and shortages of building lots and labour.
Lumber prices have surged after the government in April imposed anti-subsidy duties on imports of Canadian softwood lumber.
The PHLOX housing index rose 0.60 per cent on the homebuilding data, outperforming a modestly higher US stocks market. Shares in the nation’s largest homebuilder, D R Horton, climbed 0.24 per cent and Pulverous advanced 0.86 per cent.
The dollar rose against a basket of currencies, while prices for US government bonds fell.
The Atlanta Federal Reserve raised its second-quarter GDP estimate by one-tenth of a percentage point to a 2.5 per cent annualised rate after the data. The economy grew at a 1.4 per cent pace in the first quarter.
Single-family homebuilding, which accounts for the largest share of the residential housing market, surged 6.3 per cent to an 849,000 unit-pace last month, also a four-month high. — Reuters
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