If the goal of homebuilding is to cool rising prices, the slight uptick in new home inventory this past July won’t do the trick. According to the U.S. Commerce Department, total housing starts in single- and multi-family building rose nearly 1% in July to a seasonally adjusted rate of 1.17 million units. This comes after a nine-month low in June of 1.16 million units. Unfortunately, the resulting inventory is “not enough to catch up with home buyer demand or help cool rising home prices.”
Where are New Homes Built?
Today, most home-builders are building their properties in the Midwest and the South. From June to July, construction fell by 11% out West and 4% in the Northeast. The problem, most economists agree, is that the slight rise in construction does not meet needs in the home-buying population. Affordability and stiff competition for homes in these markets remain prevalent. The result is a market in which single-family housing stock remains very much in the red.
“Given the chronic lack of affordable housing and rapidly escalating home prices, it is worrisome that on a per capita basis, the country is producing new single-family housing stock at a rate that is similar to the trough of a typical recession,” said Freddie Mac chief economist Sam Khater in response to those numbers.
“It is more expensive to buy a new home for the American worker,” says MUFG chief economist Chris Rupkey. “We cannot be confident that home construction will pick up in the near future.”
Homebuilding will continue to take place mainly where labor is present and available, and where the materials are affordable. Critics of the current presidential administration’s trade policies say new anti-subsidy duties could keep Canadian softwood lumber imports costly.
“Supply-side challenges, including the increases in material prices and chronic labor shortages, are affecting affordability in many markets,” said National Association of Home Builders (NAHB) chief economist Robert Dietz.
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