New-home construction rose less than forecast in July amid a rebound in groundbreaking for single-family and multifamily houses, indicating the industry was trying to regain its footing at the start of the second half.
Residential starts increased 0.9% to a 1.17 million annualized rate (the estimate was 1.26 million) after a downwardly revised 1.16 million pace
Multifamily home starts rose 0.7%; single-family climbed 0.9%. Permits, a proxy for future construction of all types of homes, rose 1.5% to a 1.31 million rate (matching the estimate) after a 1.29 million pace.
A strong labor market, lower taxes and improved finances are providing support to demand for housing, which indicates that homebuilding will keep expanding, albeit at a slower pace.
Some 175,000 homes were authorized but not yet started in July, the most since February 2008, signaling that builders will stay busy in coming months.
Another encouraging sign was that single-family permits in the South were the highest since July 2007, the report showed.
At the same time, potential buyers are facing headwinds including rising property values and higher mortgage rates. For their part, builders remain limited by higher construction costs amid tariffs on imported materials including Canadian lumber. They also say they face shortages of qualified workers and ready-to-build lots.
In a separate report released by the Labor Department on Thursday, applications for jobless benefits fell by 2,000 to 212,000 in the week ended Aug. 11. Continuing claims dropped 39,000 to 1.72 million in the week ending Aug. 4, underscoring strength in demand for workers.
Single-family home starts increased to a 862,000 rate from 854,000 the prior month Groundbreaking on multifamily homes, such as apartment buildings and condominiums, rose to an annual rate of 306,000; data on these projects can be volatile.
Two of four regions posted a gain in starts, with the South increasing 10.4% and the Midwest climbing by 11.6%; the Northeast declined 4% and the West plunged 19.6%, the biggest drop since January 2017. The report shows a wide margin of error, with a 90% chance that the July figure for starts was between a 10.6% drop and a 12.4% gain. The report was released jointly by the Census Bureau and Department of Housing and Urban Development in Washington.
