Homebuilding Starts Plummet As Supply-Demand Dynamic Calms
The residential real estate market in the U.S. has decidedly fallen from its coronavirus pandemic peak.
Homebuilding starts fell 7% from June to July, according to data from the U.S. Department of Commerce reported by Reuters. The 1.53 million seasonally adjusted units started in July were below the 1.6 million predicted by economists polled by Reuters.
Though permits for future homebuilding rose slightly from June to July, builders are less confident about their market than they have been in 13 months, according to a National Association of Home Builders survey reported by Reuters. The decline in confidence comes from a perception that materials prices remain too high, as well as concerns that high home values have cooled demand.
Home values remain at a record high, with the median price of a U.S. single-family house holding steady at $385K from June to July, according to Realtor.com data reported by The New York Times. That makes three months in a row that year-over-year price growth has decelerated from its spring peak.
Sticker shock likely still plays a role in the cooling demand for houses, the Times reports, but supply has also been increasing. The number of homes put up for sale in July was 10% higher than in June, 6.5% higher than July of last year and 23% higher than its spring nadir, according to Realtor.com data.
The issue of materials prices may now be more due to perception among homebuilders than reality, considering that lumber has tumbled in price from a record in May all the way down to 2018 levels in July.
The fact that homebuilders are easing off the gas pedal at the first sign of the market cooling off is likely distressing for affordable housing advocates who claim that the pace of home construction is well behind what is needed to accommodate the country's population growth.