Headwinds for Housing: Ongoing Challenges Drive the June Decline

By at 19 July, 2022, 7:16 pm

by Raymond J. Keating –

According to the latest report from the U.S. Census Bureau, the residential housing construction industry declined in June, compared to the previous month as well as a year earlier.

Housing starts (seasonally adjusted annual rate) were down in June by 2.0 percent in May, and off by 6.3 percent compared to June of last year.

And as for building permits – a measure of future construction – they were off by 0.6 percent in June compared to May, and down by 1.6 percent versus June 2021.

The key decline in each case came in single-family unit homes. In fact, single home permits and starts have been declining since February of this year.

As noted in the following chart, single family housing starts in June actually came in just below its pre-pandemic levels.

Source: Federal Reserve Bank of St. Louis, FRED

Headwinds for Housing

These number aren’t all that surprising given the ongoing challenges being confronted by housing builders, which overwhelmingly are small businesses. According to the latest survey from the National Association of Home Builders, builder confidence took a dive in July, with confidence in the single-family homes sector experiencing the largest drop-off and the seventh monthly decline in a row.

NAHB Chairman Jerry Konter, who is a home builder and developer from Savannah, Georgia, noted, “Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home.” And of course, increased interest rates have impacted sales and traffic negatively.

Housing is a vital aspect of the U.S. economy, and the turn down recently points to more worries about the possibility of recession.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


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