Homebuilders pulled back sharply on construction of apartment complexes in July, causing housing starts to tumble to a three-month low.
The Commerce Department said Wednesday that housing starts fell 4.8 percent in July to a seasonally adjusted annual rate of 1.16 million. Groundbreakings for multi-family buildings such as apartments slumped 17.1 percent, while single-family house construction slipped 0.5 percent.
Home construction has increased 2.4 percent year-to-date, but the gains have done little to offset the dwindling number of homes listed for sale. The shortage of properties for sale has pushed prices up at a faster pace than income growth, making home ownership less affordable for many would-be buyers.
Stephen Stanley, chief economist at Amherst Pierpont Securities, said that because of the lack of homes on the market “builders are attempting to meet that need but are hamstrung to a degree by shortages of skilled workers” and land restrictions.
Housing starts dropped in the Northeast, Midwest and West but rose modestly in the South.
Building permits, an indicator of future construction, decreased 4.1 percent to 1.22 million.
While home construction has increased, it’s done little to ease the pressure from a decline in listings for existing homes — a much larger segment of the housing market.
The number of sales listings has been falling on an annual basis for the past 25 months. There were 1.96 million homes for sale in June, a 7.1 decline from a year ago, according to the National Association of Realtors.
More importantly, home construction is concentrated in certain markets, according to a new analysis by the real estate firm Trulia.
Dallas, Houston and Austin in Texas are on pace to build a combined 130,000 new homes this year. That total would be more than 10 percent of all U.S. permits and account for nearly as much as construction in the 50 other large metro areas combined.
The lack of properties on the market has helped to bolster confidence among homebuilders who see healthy demand for the homes that are available.
The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday rose to 68 in August, a four-point gain from July. Any reading above 50 signals expansion.