Home building in the United States, has rebounded less than expected this month. This rebound is mainly being blamed upon the high prices of lumber and other raw materials, that has continued to hinder the builder’s capacity to take advantage of the acute shortage that has come upon the industry.
The report from the US Department of Commerce on Wednesday also showed permits for future home construction falling to a seven-month low. Housing completions also declined while the number of homes authorised for construction but not yet started rose to the highest level since 1999, indicating supply will likely remain tight for a while and boost house price inflation.
“Shortages of materials and labour have builders struggling to increase production of new homes, though the demand remains strong,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “Potential homebuyers should expect tight inventories and rising prices for both new and existing homes for the foreseeable future.”
Housing starts rose 3.6 percent to a seasonally adjusted annual rate of 1.572 million units last month. Data for April was revised down to a rate of 1.517 million units from the previously reported 1.569 million units.
Groundbreaking activity rose in the Midwest, the West and the densely populated South, but fell in the Northeast.
Economists polled by Reuters news agency had forecast starts increasing to a rate of 1.630 million units. Last month’s increase still left starts below March’s rate of 1.725 million units, which was the highest level since June 2006. Building starts, however, jumped 50.3 percent on a year-on-year basis in May.
Though lumber prices dropped from a record high set in early May, softwood lumber prices increased 154.3 percent year-on-year in May, according to the latest producer pricer data.
A survey from the National Association of Home Builders (NAHB) on Tuesday showed confidence among single-family homebuilders fell to a 10-month low in June.
The NAHB blamed the ebb in sentiment on “higher costs and declining availability for softwood lumber and other building materials”, noting that was driving up prices of new houses “which has slowed the strong pace of home building”.
Tariffs on steel imports are also adding to building costs.
US stocks opened lower as investors awaited hints from the Federal Reserve on when it would start tapering its massive bond buying programme. The dollar was steady against a basket of currencies. US Treasury prices rose.