Once again, housing completions stood out as the only positive aspect in the recent housing starts data released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
In July, privately owned housing starts were reported at a seasonally adjusted annual rate of 1.238 million units, showing a decrease of 6.8% from June and a 16% decline compared to the previous year. Single-family starts were down by 14.1% month over month and 14.8% annually, while multifamily starts increased by 11.7% from June but were down by 21.8% year over year.
According to Lisa Sturtevant, the chief economist at Bright MLS, both single-family and multifamily housing starts showed significant decreases compared to the previous year. She noted that while starts of units in buildings with 5+ units increased, single-family starts declined in comparison to June.
In terms of completions, homes were finished at an annual rate of 1.529 million units in July, reflecting a 9.8% monthly increase and a 13.8% annual growth. Single-family completions reached a rate of 1.054 million units, up by 0.5% from June and 3.6% from the previous year. Despite a 24.4% monthly decrease in multifamily completions to 473,000 units, there was still a 49.2% increase compared to the previous year.
Although the increase in completed new home inventory is positive for markets with tight housing supply, economists anticipate potential challenges in the long term. However, factors such as dropping mortgage rates may help sustain construction activity later in the year.
Robert Frick, a corporate economist at Navy Federal Credit Union, mentioned that the high inventory of new homes is currently limiting construction, but with decreasing mortgage rates, a resurgence in construction is expected in the near future.
The drop in building permits issued in July further indicates the strain on new construction projects, with permits falling to an annual rate of 1.396 million units, down 4% from June and 7% from the previous year. The decline in permits was primarily driven by a decrease in multifamily permits, which saw a 12.4% monthly and 18.2% annual decline.
Regionally, the Northeast experienced the only monthly increase in starts at 42.6%, while the South, Midwest, and West all saw declines. On an annual basis, the Northeast was the only region to post a yearly increase, with the South, Midwest, and West recording decreases.
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