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US housing starts – July 2019: New housing construction drops for the third straight month




U.S .. home construction fell for a third straight month in July amid a sharp decline in multi-family housing construction, but a jump in permits for a seven-month high offered hope for the struggling housing market.

Home starts fell 4.0% to a seasonally adjusted annual rate of 1.191 million units last month, the Department of Commerce said Friday. Home building was probably disrupted by Tropical Storm Barry, which drained Louisiana in mid-July.

June data were revised to show that home construction fell at a rate of 1.241 million units, rather than falling to a rate of 1[ads1].253 million units previously reported.

Economists polled by Reuters had predicted that housing starts would roll up to a pace of 1.257 million units in July.

The housing market has not benefited greatly from falling mortgage rates due to lack of land and manpower, limiting the builders' ability to construct sought-after cheaper homes. As a result, the housing market continues to plummet with tight inventory and slow sales growth.

The 30-year fixed mortgage rate has fallen to 3.60% from a 4.94% peak in November, according to data from mortgage lender Freddie Mac

Further declines are likely because the Federal Reserve is expected to reduce interest rates next month amid rising risk of the economic outlook from trade tensions and slowing global growth, which contributed to an inversion of the US Treasury curve and triggered recession fears.

The US 2-year government bond rate rose above the 10-year bond rate on Wednesday for the first time since June 2007. The US central bank cut its short-term interest rate last month for the first time since 2008.

Detached housing, which accounts for the largest share of the housing market, rose 1.3% to a rate of 876,000 units in July, the highest level in six months. Detached houses started in the Northeast, West and Midwest, but fell 3.9% in the populous South.

Building permits increased by 8.4%, the largest gain since June 2017, to a rate of 1,336 million units in July. Last month's wave is a positive development for permits, which have been weak this year. Much of the decline in permits has been concentrated in the detached housing segment.

A survey on Thursday showed confidence among home builders emerged in August. Builders reported high demand for single-family homes, but said they "continue to struggle with rising construction costs as a result of excessive regulations, a chronic shortage of workers and a shortage of buildable lots."

According to developers, lower borrowing costs had not strengthened the housing market because of "interest rate declines occurred due to financial uncertainty."

Housing investment has contracted for six straight quarters, the longest stretch since the Great Recession 2007-2009.

Permits to build single-family homes increased 1.8% to a rate of 838,000 units in July, the highest level in eight months. Despite the increase last month, the permits continue to delay housing starts, suggesting that detached housing can remain lukewarm.

Starts for the volatile multi-family housing segment fell 16.2% to a rate of 315,000 units in July. Permits for the construction of family homes increased by 21.8% to a rate of 498,000 units last month.



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