The most recent housing starts data paints a concerning picture of the US real estate market. While housing completions offer a glimmer of hope, significant declines in new construction starts and building permits suggest potential challenges ahead for both homebuyers and the broader economy.
Housing Starts: A Troubling Decline
July’s housing starts data reveals a worrying trend:
- Privately owned housing starts: 1.238 million units (seasonally adjusted annual rate)
- Down 6.8% from June
- Down 16% compared to a year ago
Breaking it down further:
- Single-family starts: 851,000 units
- Down 14.1% month-over-month
- Down 14.8% year-over-year
- Multifamily starts: 363,000 units
- Up 11.7% from June
- Down 21.8% year-over-year
The Silver Lining: Housing Completions
Amidst the declining starts, housing completions offer some positive news:
- Overall completions: 1.529 million units annually
- Up 9.8% month-over-month
- Up 13.8% year-over-year
- Single-family completions: 1.054 million units
- Up 0.5% from June
- Up 3.6% from a year ago
- Multifamily completions: 473,000 units
- Down 24.4% monthly
- Up 49.2% annually
Building Permits: A Leading Indicator of Future Challenges
The decline in building permits suggests continued strain on new construction:
- Overall permits: 1.396 million units annually
- Down 4% from June
- Down 7% year-over-year
- Multifamily permits: 408,000 units
- Down 12.4% monthly
- Down 18.2% annually
- Single-family permits: 938,000 units
- Down 0.1% monthly
- Down 1.6% annually
Expert Insights: What This Means for the Market
Lisa Sturtevant, chief economist at Bright MLS, notes:
“Without more homes coming onto the market, housing affordability will continue to be a challenge. There is a structural housing deficit in the U.S., with a housing shortfall of between 1.5 million and 7 million units, depending on what source you look at.”
Robert Frick, corporate economist at Navy Federal Credit Union, offers a more optimistic outlook:
“The large inventory of new homes is suppressing building at this point, but with mortgage rates dropping and likely to fall more, we should see a pick up in construction later this year.”
Regional Variations: A Closer Look
The data reveals significant regional disparities:
- Northeast (164,000 starts): Up 42.6% monthly, up 45.1% annually
- South (640,000 starts): Down 13.6% monthly, down 20% annually
- Midwest (171,000 starts): Down 1.7% monthly and annually
- West (263,000 starts): Down 12.0% monthly, down 31.9% annually
Looking Ahead: Implications for Homebuyers and the Economy
As we digest this data, several key points emerge:
- Affordability challenges may persist: With new construction slowing, the existing housing shortage could worsen
- Regional opportunities may arise: The Northeast’s growth could present opportunities for buyers and investors
- Mortgage rates will be crucial: Further declines in rates could stimulate construction later in the year
- Policy interventions may be needed: Addressing the structural housing deficit may require government action
- Market adaptations: Builders and buyers may need to adjust strategies in light of these trends
The latest housing starts data paints a complex picture of the US real estate market. While the increase in housing completions offers some relief to tight inventories, the significant declines in new starts and permits signal potential challenges ahead. As the market navigates these headwinds, close attention to economic indicators, policy decisions, and regional variations will be crucial for anyone looking to buy, sell, or invest in real estate in the coming months.
