US building permits fall by the most since 2017
The weakest set of building permits since 2017 underscored an overall weak pack of data for the US housing market in June, doing little to allay broader concerns about the health of the domestic economy.
Building permits, which track early-stage construction approval, fell 6.1 per cent year-on-year in June to a seasonally adjusted annual rate of 1.22m, according to the US Census Bureau, and came in below market expectations for a slight increase to 1.3m
In percentage terms, it was the biggest drop in permits since February 2017, while the annual rate hit its lowest since September of that year.
The number of new residential construction projects commenced, as measured by housing starts, fell 0.9 per cent year-on-year to a seasonally adjusted annual rate of 1.253m, which was marginally below the median forecast of 1.26m from economists in a survey by Refinitiv. May’s figure was revised lower by 40,000 to 1.265m.
Housing market data, particularly starts and permits, can be particularly noisy from month to month, but the sector overall has been one of the weaker parts of the US economy as relatively high interest rates last summer were among factors that turned some would-be buyers away.
A gauge of homebuilder confidence yesterday ticked one point higher in July to 65, but the survey by the National Association of Home Builders still showed many builders were contending with rising construction costs and labour shortages.
The US housing market continues to face a “seemingly offsetting set of headwinds and tailwinds,” Scott Volling at PwC said.
“While the inventory of for-sale inventory appears to be shrinking again (driving prospective buyers towards new homes) and mortgage rates continue to be favourable, the availability and cost of land, labour and materials continues to challenge builders to produce more homes at an affordable price point,” he added.
Some economists remained upbeat despite today’s data. James Knightley, chief international economist at ING, said in a note the details of the Census Bureau’s report showed weakness in both housing starts and building permits were a result of a falling appetite for apartment construction.
“The consumer is in great shape with employment at record levels, wages rising strongly in real terms and confidence remaining firm. Importantly, mortgage rates have plummeted in the wake of the plunge in Treasury yields”, Mr Knightley wrote.
“This is making housing more “affordable” despite the strength of home prices. Mortgage approvals for house purchases are looking quite strong . . . which should translate into housing demand in the coming months,” he added.