July Housing Starts: Backlogged

• 1.534 million new homes were started in July, down 7% from June but up 2.5% from July 2020, according to the U.S. Census Bureau.

• Housing permits were up 2.6% from June and up 6% from July 2020, to 1.635 million.

• 1.391 million homes were completed in July, up 5.6% from June and 3.8% from July 2020.

Another so-so report on home construction was the latest piece of evidence that homebuilders are having a difficult time overcoming the enduring constraints posed by the global supply shortage. Limited access to key building supplies has upped prices for materials and translated to higher list prices for would-be homebuyers. Home shoppers remain eager and demand for housing remains strong, but sticker shock may also have prevented some shoppers from committing to a purchase. The supply backlog has also limited homebuilders’ ability to confidently pencil out the finances surrounding potential projects – a significant constraint for the typically risk-averse industry. Still, despite the slowing momentum in the sector, a resumption in activity is likely on the horizon and the industry remains in good shape compared to recent years, with both starts and permits above pre-pandemic levels. More than 30% of new homes available for sale in June had yet to be started – the highest share ever recorded and double the average share from 2000 to 2019, suggesting an uptick in housing starts is likely on the way once the supply side limitations recede. Permits are also on the rise, again suggesting more activity to come, and measures of builder confidence are very strong compared to historical levels.

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