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Homebuilding activity increased last month, but the gain is likely to be temporary.
Housing starts climbed 6.3% in June to a seasonally adjusted annual rate of 1.64 million units, but permit numbers, a gauge of future construction, for both single-family and multifamily markets weakened in June, the U.S. Department of Housing and Urban Development and the Census Bureau reported Tuesday.
Broken out, single-family starts rose 6.3% to a seasonally adjusted annual rate of 1.16 million while the multifamily sector, which includes condos and apartment buildings, increased 6.2% to a 483,000 pace.
The number of single-family units currently under construction is up 32% compared to a year ago.
While the June uptick in housing starts was viewed as a positive note by housing economists, particularly in a tight housing inventory environment, builders said they are facing too many challenges to ramp up construction fully to meet increased buyer demand.
“While lumber prices have recently begun to trend downward, builders continue to deal with rising prices of other building materials, such as oriented strand board, and major delays in the delivery of these goods,” said Chuck Fowke, chairman of the National Association of Home Builders. “We are thankful that the White House recently held a meeting to seek solutions to these supply chain issues that are harming housing affordability.”
Homebuilders and other housing officials met last week with White House leaders, including Housing and Urban Development Secretary Marcia Fudge and Commerce Secretary Gina Raimondo, to discuss short-term supply chain disruptions that have been affecting the homebuilding industry.
Lumber prices have fallen nearly 70% from a record high in early May. However, softwood lumber surged 125.3% in June compared to a year ago. Other building material costs have risen sharply as well.
Housing permits last month fell 5.1% to an annual rate of 1.60 million. Single-family permits fell 6.3%.
“The recent weakening of single-family and multifamily permits is due to higher material costs, which have pushed new-home prices higher since the end of last year,” said Robert Dietz, the NAHB’s chief economist. “This is a troubling sign for future housing production. This is a challenge for a housing market that needs additional inventory.”
The median price of a newly built home in May was up 18% compared to a year earlier, according to Census data.