US home construction dips in August, big slump in the South

Dhaka,  Monday,   2016-09-20
Published : 20 Sep 2016, 20:37:29

US home construction dips in August, big slump in the South

Homebuilders pulled back on construction in the South, causing the pace of August housing starts nationwide to fall to their lowest level in three months.

Despite the monthly decline, construction activity has accelerated for much this year. Builders are increasingly optimistic about sales growth, a reflection of how steady job gains are leading more Americans to purchase new houses and sign leases for new apartments, reports AP.

In August, ground breakings dropped 5.8 per cent to a seasonally adjusted annual rate of 1.14 million from 1.21 million in July, the Commerce Department said Tuesday. The pace of construction was the lowest since May. Starts plummeted 14.8 per cent in the South, likely reflecting the monthly volatility of the government report. Building activity increased in the Northeast, Midwest and West.

Jennifer Lee, a senior economist at BMO Capital Markets, blamed the decrease in construction in the South on August rainstorms.

"Look for a rebound in the next month or two," Lee said.

Residential construction has picked up this year as steady job gains and low mortgage rates propel more Americans to seek out homes. Starts have increased 6.1 per cent so far in 2016, with single-family houses leading the way. Construction activity could be even stronger based on demand, but rising land and labour costs have held it in check.

In the short term, builders have relatively few properties in the pipeline. Authorised permits fell 0.4 per cent in August to an annual rate of 1.14 million - a level slightly lower than pace of new construction.

Yet job growth has pushed the unemployment rate down to just 4.9 per cent. Hiring usually corresponds with increased permits for single-family houses.

The pace of job growth has exceeded new construction in recent years. An analysis released Monday by the National Association of Realtors found that home construction lags the rate of job growth in 80 per cent of metro areas, including New York City, Dallas, San Francisco, Miami and Chicago.

Low mortgage rates have added to the momentum. The average 30-year fixed-rate mortgage was 3.50 per cent last week, according to mortgage buyer Freddie Mac. That average is near record lows and significantly below the historic average of 6 per cent.

In that environment, confidence among homebuilders climbed the highest level in nearly a year, reflecting a brighter outlook for sales now and into 2017. The National Association of Home Builders/Wells Fargo builder sentiment index released Monday climbed six points this month to 65 following a downwardly revised reading of 59 in August.

Annual housing starts are still below the 25-year average of roughly 1.3 million, even after having rebounded from the depths of the housing crash that triggered a recession nearly nine years ago. - IH

Editor : A.H.M Moazzem Hossain
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