U.S. homebuilding falls in September amid shortages of raw materials

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U.S. homebuilding falls in September amid shortages of raw materials

WASHINGTON, Oct 19 Reuters - U.S. homebuilding unexpectedly fell in September and permits dropped to one-year low amid acute shortages of raw materials and labor, strengthening expectations that economic growth slowed sharply in the third quarter.

The report by the Commerce Department on Tuesday also showed housing completions hitting a 13 - month low. It followed the news on Monday that production in U.S. factories had fallen most by September in seven months. As global economies emerge from the COVID -19 pandemic, strong demand is straining supply chains against worker shortages.

In the United States, every industry is experiencing shortages, fanning inflation.

Momentum in demand appears to be positive, says Rubeela Farooqi, chief U.S. economist in White Plains, New York. What is it doing to catch up given higher input costs and shortages that remain headwinds for builders? Housing starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month, the lowest level since April. Data for August was downgraded from the previously reported 1.580 million units to a rate of 1.615 millions units.

Economists polled by Reuters had forecast that estimates from starting would rise to a rate of 1.620 million units. Increasing value of lumber after abseiling from record highs in May. Building materials, like windows and electric breaker boxes, are out of stock. The pandemic has caused labor market dynamics to change.

Starts changed based on the 1.725 million unit-pace level scaled in March, which was more than a 14-year high.

Single-family starts, accounting for the largest share of the housing market, were unchanged at a rate of 1.080 million units last month. Single-family starts rose in the Northeast and the densely populated South but fell in the West and Midwest.

Starts for buildings with five units or more dropped 5.1% to a rate of 467,000 units last month.

A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders rising in October but noted that builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times. Residential investment contracted in the second quarter of double digit growth after three straight quarters of residential growth. It should probably decline further in the last quarter. The Atlanta Federal Reserve is estimating that gross domestic product growth has continued to decline in the last quarter to a 1.2% annualized rate. The economy grew rapidly in the second quarter at a 6.7% pace of the economy.

The housing market was boosted early by an exodus from cities to suburbs and other low-density locations as Americans sought more spacious accommodations for home offices and online schools.

That tailwind is ebbing as workers return to offices and schools for in-person learning, thanks to COVID -19 vaccinations. Not only does inflation increase the cost of doing business and so increases mortgage rates.

The fixed mortgage rate for 30 years rose to an average of 3.05% in the preceding week from 2.99% in the last week, according to mortgage giant Freddie Mac. Although still low by historical standards, rising borrowing costs could make homeownership less affordable for some first-time buyers. In July, houses and villas gained double the annual house price growth on an annual basis.

Permits for future homebuilding plunged 7.7% to a rate of 1.589 million units in September. Single-family permits fell 0.9% to a rate of 1.041 million units. Permits for buildings with five units or more plummeted 21.0% to a rate of 498,000 units.

Housing completions dropped 4.6% last month to a rate of 1.240 million units. Single-family home completions were unchanged at a rate of 953,000 units. The pandemic has lengthened the time from when a permit is issued for single-family home construction to completion, which economists blame on supply constraints.

The inventory of previously owned homes is near record lows, leading to record high annual home prices.

Realtors estimate that single-family housing starts and completion rates need to be in the range of 1.5 million to 1.6 million units per month to close the inventory gap.