The trend is an acceleration of declines or marginal gains in May. The month-over-month numbers aren’t much better, with single-family permits (-3.7%), starts (-4.6%), completions (-12.5%) and homes under construction (-0.3%) all declining.
‘Falling construction activity reflects the litany of economic headwinds facing homebuilders. These include high mortgage rates, record-high home prices, rising inventory of existing homes for sale and the reignited trade war that economists fear will raise prices for construction inputs.
“In the current economic climate, many individuals and families are not interested in looking for a new place to live, whether as a homeowner or a renter,” Lisa Sturtevant, chief economist for Bright MLS, said in a statement. “The U.S. mobility rate — a measure of the share of the U.S. population that moves each year — is historically low.”
Regionally, the South makes up the lion’s share of the new-home market, and the construction numbers there are dismal. The year-over-year declines are visible across the board, and only in select cases are they better than the numbers in other parts of the country.
The economic environment is weighing on homebuilders. While the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for July rose by a point, it remains near low points that approach some of the worst periods for the housing market this century. This includes the aftermath of the 2008 financial crisis and the start of the COVID-19 pandemic.
“Single-family conditions are measurably weakening as resale inventories levels rise, particularly in previously fast-growing areas such as the U.S. south,” NAHB chief economist Robert Dietz said in a statement.
“Single-family home building in the South is down 12.4% on a year-to-date basis, far outpacing declines in the Northeast and the West. However, single-family home building is up 10% on a year-to-date basis in the Midwest, where housing affordability conditions are generally better than much of the nation.”