Experts Overestimate Housing Starts

The construction industry continues to improve as evidenced by increasing housing starts, but economists overestimated July performance, despite a jump of 5.9% over the previous month. Homebuilder confidence …

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The construction industry continues to improve as evidenced by increasing housing starts, but economists overestimated July performance, despite a jump of 5.9% over the previous month. Homebuilder confidence is also on the rise, although many in the sector are suffering from worker shortages and spiraling materials costs. Experts believe the overall impact will be a continued increase in home prices as supply remains constricted and more buyers enter the market to take advantage of still-low interest rates while they last. For more on this continue reading the following article from TheStreet.

Housing starts rose 5.9% in July, after falling in June, but the data was slightly below expectations.

The Census bureau and the Department of Housing and Urban Development said homebuilders began construction on 101,600 homes or a seasonally adjusted rate of 896,000. That is up from a revised estimate of 846,000 in June and 20% higher from a year ago.

Economists polled by Bloomberg expected housing starts to rise by 7.6% to a seasonally adjusted rate of 900,000 units from the original estimate of 836,000.

Single-family housing starts in July were at the rate of 591,000, 2.2% below June’s revised figure of 604,000. Multi-family units in July stood at 290,000.

Building permits, meanwhile, rose 2.7% from June to a seasonally adjusted rate of 943,000, more than the 935,000 economists were expecting.

Homebuilder confidence is at a nearly eight-year high, but construction of new homes has lagged. That is because builders still face multiple headwinds, including a shortage of workers and developed land, soaring material costs and tight credit.

That means supply of new homes for sale continues to be tight, causing prices to rise. And homebuilders want to keep inventories lean so that they can earn a profitable margin.

Still, strong homebuilder sentiment is an indication that builders will continue to construct more homes, as the recovery continues and the industry recuperates.

This article was republished with permission from TheStreet.

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