New-home construction in the U.S. climbed in July, reflecting a rebound in multifamily projects that overshadowed a slowdown in single-family properties.
Housing starts climbed 5.9% to an 896,000 annualized rate from a revised 846,000 pace in June that was higher than previously reported, figures from the Commerce Department showed today in Washington. The median estimate of 82 economists surveyed by Bloomberg was for a 900,000 rate. Multifamily construction surged 26%, while work began on 2.2% fewer single-family homes.
Builders may be limiting supply amid a shortage of lots and materials as they try to boost prices and revenue in an industry that has supported growth. Further gains in employment will be needed to help sustain demand and make up for the jump in interest rates that is hurting affordability.
“Things are still far better than they were a year ago, but it feels like progress has stalled out for a little while,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford Connecticut, who projected starts would rise to a 900,000 pace. Builders will eventually “expand operations, they’ll hire workers and get more aggressive. At the moment they’re happy to keep the market tightly supplied because that allows them to raise prices.”
Another report today showed the productivity of U.S. workers rose in the second quarter, rebounding from the biggest back-to-back declines since 1993. The measure of employee output per hour increased at a 0.9% annualized rate after 1.7% decreases in each of the prior two quarters, according to Labor Department data.
Also today, a report from Thomson Reuters/University of Michigan showed consumer confidence unexpectedly dropped in August from a six-year high as Americans faced rising interest rates. The group’s preliminary sentiment index fell to 80 from 85.1 in July, which was the highest since July 2007. The median projection of 68 economists surveyed by Bloomberg called for little change at 85.2. The decline this month was the biggest since December.
Stocks fluctuated between gains and losses after the reports. The Standard & Poor’s 500 Index was up less than 0.1% to 1,662.73 at 10:39 a.m. in New York after suffering its biggest drop in two months yesterday.
Estimates for housing starts in the Bloomberg survey ranged from 815,000 to 1.05 million following a June pace that was first reported as 836,000.
Building permits climbed 2.7% in July to a 943,000 annualized rate, again paced by a jump in multifamily. They were projected to rise to 945,000 within a range of 885,000 to 1 million, after a previously reported reading of 918,000.
Building applications for single-family projects exceeded the number of starts, signaling some scope for a pickup in construction in coming months.
Construction of single-family houses decreased to a 591,000 rate, the fewest since November, today’s report showed. Work on multifamily homes, such as apartment buildings, climbed to a 305,000 rate. Work on these projects is often volatile, with last month’s surge following a 24.8% plunge in June.
Three of four regions had an increase in starts last month, led by a 40.2% jump in the Northeast, according to the report. Construction dropped 7% in the South.
On a year-to-year basis, total housing starts were up 20.9% in July.