Homebuilding in the United States unexpectedly dipped in September, with permits falling to a one-year low due to severe shortages of raw materials and labor, bolstering projections for a strong slowdown in third-quarter economic growth.
Last month, the disparity between completed houses and those still under construction was the greatest on record, according to data released by the Commerce Department on Tuesday. As global economies recover from the COVID-19 pandemic, strong demand collides with workforce shortages, straining supply chains and fueling inflation. In the United States, there are shortages in almost every industry.
“Momentum in demand still appears to be positive,” said Rubeela Farooqi, U.S.chief economist at High-Frequency Economics in White Plains, New York. “But supply is struggling to catch up given higher input costs and shortages that remain headwinds for builders.”
Last month, housing starts fell 1.6 percent to 1.555 million units on a seasonally adjusted yearly basis, the lowest level since April. The rate for August was lowered down to 1.580 million units from 1.615 million units previously reported.
Reuters polled economists, who predicted a jump in housing starts to 1.620 million units. After falling from record highs in May, lumber prices are climbing again. Building materials, such as windows and electric breaker boxes, are scarce.
Prices for copper, another important building material, have risen more than 16 percent since the end of September, boosted by decades-low supply. The epidemic has disrupted labor market dynamics, resulting in a lack of employees needed to produce and transport raw materials and completed goods to markets.
Starts have declined from the 1.725 million unit-pace level scaled in March, which was more than a 14-1/2-year high. Single-family starts, which account for the lion’s share of the housing market, remained constant last month at 1.080 million units. Single-family homebuilding increased in the West and Midwest but declined in the Northeast and densely populated South, which was also likely impacted by Hurricane Ida’s severe flooding. Last month, starts on structures with five or more units fell 5.1 percent to 467,000 units.
On Monday, a survey from the National Association of Home Builders showed confidence among single-family homebuilders rising further in October. Still, it noted that “builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times.”
Stocks on Wall Street were trading higher after positive earnings reports from Johnson & Johnson (JNJ.N) and Travelers (TRV.N) boosted risk appetite. The value of the dollar in relation to a basket of currencies decreased. Treasury prices in the United States were varied.
Last month, the drop in homebuilding came on the heels of news on Monday that factory output in the United States plummeted by the most in seven months in September. After shrinking in the April-June quarter, residential investment is anticipated to have remained poor in the third quarter.
Gross domestic product growth estimates for the third quarter are mostly below a 3% annualized rate. The economy grew at a 6.7% pace in the second quarter.
Early in the coronavirus epidemic, an exodus from cities to suburbs and other low-density areas boosted the housing market as Americans sought more spacious lodgings for home offices and online schooling, resulting in three straight quarters of a double-digit rise in residential spending. As a result of COVID-19 vaccines, workers are returning to offices and schools are reopening for in-person learning. Mortgage rates are rising as a result of high inflation.