US house building starts dropped for the third month running in July, with a noticeable decline in the construction of multi-family housing units.
House building starts dropped 4.0 per cent to a seasonally adjusted annual rate of 1.191 million units last month, the Commerce Department has confirmed. House building was likely disrupted by Tropical Storm Barry, which drenched Louisiana in the middle of July.
Data for June was also revised down to show house building falling to a pace of 1.241 million units, rather than dropping to a rate of 1.253 million units as previously reported.
The fall came as a surprise to economists polled by Reuters who had forecast house building starts would edge up to a pace of 1.257 million units in July.
Despite the 30-year fixed mortgage rate dropping to 3.60 per cent from a peak of 4.94 per cent in November, the housing market has not benefited much because of land and labour shortages, which are constraining builders’ ability to construct sought-after lower-priced homes. That has left the housing market continuing to grapple with tight inventory and sluggish sales growth, also affecting opportunities for overseas property investors.
Further declines are likely as the Federal Reserve is expected to cut interest rates again next month amid growing risks to the economic outlook from trade tensions and slowing global growth.
Single-family house construction, which accounts for the largest share of the housing market, increased 1.3 per cent to a rate of 876,000 units in July, the highest level in six months. Single-family house building starts rose in the Northeast, West and Midwest, but dropped 3.9 per cent in the populous South.
However, building permits surged 8.4 per cent, the largest gain since June 2017, to a rate of 1.336 million units in July, raising hopes that construction starts will gain a boost in the near future, though despite the rise permits continue to lag house building starts.