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WASHINGTON—Home construction across the U.S. staged a modest rebound last month after a big June drop, but was weaker than Wall Street had expected, with many analysts taking a bleak view of the housing market.
Housing starts grew 0.9% in July from the prior month, significantly weaker than the 8.3% bounce back economists surveyed by The Wall Street Journal had expected. This follows a sharp 12.9% drop in housing construction in June, the largest monthly decline since the end of 2016.
“After a tough report last month, this is strike two for the housing market,” said John Pataky, executive vice president at TIAA Bank. “This report reflects some fundamental issues that cloud the housing horizon.”
The weaker-than-expected home building could signal fewer homes on the market in the coming months, potentially exacerbating supply constraints in the housing sector. Rising material costs and skilled labor shortages are making it difficult for builders to expand and driving up prices. Rising borrowing costs are an added headwind to the market, making the residential sector a headwind for an otherwise robust national economy. Residential investment has contracted in four of the past five quarters, according to the Bureau of Economic Analysis.
“June appeared to be an anomaly, but July results indicate a trend,” said Scott Volling, principal at PricewaterhouseCoopers.
Meanwhile, a gauge of U.S. home-builder confidence fell in August after plateauing in July and declining for much of 2018.
Still, home builders seem willing to attempt to push through new construction projects. Residential building permits, which can signal how much construction is in the pipeline, for single-family homes grew 1.9% in July from the prior month, the largest monthly gain since October.
The broader trend shows the housing market notching continued building, as starts rose by 6.2% in the first seven months of 2018 compared with the same period a year earlier. Housing-starts data are volatile from month to month and can be subject to large revisions. July’s 0.9% increase for starts came with a margin of error of 11.5 percentage points.
Some analysts argued weather could have been at play in the recently weak figures. While construction grew in the South and Midwest, they declined in the Northeast and fell starkly in the West in July.
“There have been extensive weather issues in the West this summer, including wildfires and a regionwide heat wave, while the Northeast was very wet in July … and so far in August,” said Stephen Stanley, chief economist at Amherst Pierpont Securities, in a note to clients Thursday. “If this factor is impacting the data, then do not be surprised if August is relatively soft as well.” Some analysts argued weather could have been at play in the recently weak figures. While construction grew in the South and Midwest, they declined in the Northeast and fell starkly in the West in July.
“There have been extensive weather issues in the West this summer, including wildfires and a regionwide heat wave, while the Northeast was very wet in July … and so far in August,” said Stephen Stanley, chief economist at Amherst Pierpont Securities, in a note to clients Thursday. “If this factor is impacting the data, then do not be surprised if August is relatively soft as well.”
Overall, single-family home building has held near the highest levels since before the 2007-09 recession, while construction of multifamily buildings eased as the market for new condominiums and apartments has cooled.
Starts grew in July from the prior month for single-family construction and multifamily construction. Permits last month were up for buildings with five or more units and for single-family homes compared with June.
Overall, single-family home building has held near the highest levels since before the 2007-09 recession, while construction of multifamily buildings eased as the market for new condominiums and apartments has cooled.
Starts grew in July from the prior month for single-family construction and multifamily construction. Permits last month were up for buildings with five or more units and for single-family homes compared with June.
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