The United States housing market slowed at the fastest pace since 2016 in June. Permits and new-home ground breaks are down to their lowest level in nine months, as mortgage rates continue to rise. Materials and labor costs continue to rise, putting a squeeze on the market that is already struggling to fill key labor requirements to keep up with demand.
Buyer and developer constraints continue as economists await July’s figures to determine if the fall in the housing market will continue.
Tariffs continue to weigh on builders, as prices of lumber and other materials rise. Rising home prices and increased interest rates are growing faster than wage growth, causing more people to rent or wait to buy a home. Ready-to-build lots are difficult for developers to find along with qualified workers, according to developers.
Investment analysts claim that a drop in the housing market can be explained, but a drop of this magnitude is not about to be explained. Analysts believe June’s drop may be an anomaly that will begin to correct in July.
Single family home starts hit their lowest level since December, falling to 858,000, down from 944,000. Multifamily home groundbreaking fell to an annual rate of 315,000. These starts include condos and apartment buildings.
A decline in starts hit all four regions, with the Midwest posting a 35.8% drop.
Residential starts fell to 1.17 million at an annualized rate, down 12.3%. Single-family home starts are down 9.1%. Permits for future construction are also down 2.2%.
Business Insider reports that the 1.26 million, seasonally adjusted annual rate of housing completions, means that the housing market is at a 3-year low in the gap between supply and demand.
The report indicates that the balance between inventory and demand will start to close, causing builders to be under increased pressure to meet growth demands. Construction labor is on the rise, with 4,000 residential jobs, including plumbers and electricians, added between May and June. The increase in labor is a positive side for the market, with signals that construction may pick up in the coming months.
The number of completed homes in June rose by 2.2% compared to the same period a year prior. An increase in completed homes is expected to provide immediate relief in the housing market, which is still suffering from low inventory levels.
Data indicates that the housing market may pick up in the coming months, as developers add new workers to the workforce to meet demand.