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U.S. permits for future homes hit 8-month low

Christian Fernsby |
U.S. homebuilding increased more than expected in June, but permits for future home construction fell to an eight-month low, likely reflecting uncertainty caused by expensive building materials as well as shortages of labour and land.

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The report from the Commerce Department on Tuesday suggested that a severe shortage of houses, which has boosted prices and sparked bidding wars across the country, could persist for a while. Demand for houses is being driven by low mortgage rates and a desire for more spacious accommodations during the COVID-19 pandemic.

Though lumber prices are coming down from record highs, builders are paying more for steel, concrete and lighting, and are grappling with shortages of appliances like refrigerators.

Housing starts rose 6.3% to a seasonally adjusted annual rate of 1.643 million units last month. Data for May was revised down to a rate of 1.546 million units from the previously reported 1.572 million units. Economists polled by Reuters had forecast starts would rise to a rate of 1.590 million units.

Despite last month’s increase, starts remained below March’s rate of 1.737 million units, which was the highest level since July 2006. Homebuilding increased in the West and the populous South, but fell in the Northeast and Midwest.

Single-family starts rose 6.3 per cent to a rate of 1.160 million units. The volatile multi-family homebuilding category advanced 6.2 per cent to a pace of 483,000 units.

Starts increased 29.1 per cent on a year-on-year basis in June.

Permits for future homebuilding fell 5.1 per cent to a rate of 1.598 million units in June, the lowest level since October 2020. Permits are now lagging starts, suggesting that homebuilding will slow in the coming months.


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