Key Takeaways
- Economists said there’s no turnaround in sight for a housing market that’s short on properties and long on costs.
- Housing starts rose in July, but building permits were lower. This indicates that builders will likely be unable to sustain their momentum in the coming months.
- Home sales in July were the slowest in more than a decade, as homes stayed on the market an average of 43 days.
- Despite the slow pace of home sales, inventory dropped, as frustrated sellers pulled houses off the market amid affordability pressures for buyers.
Homebuilders were busier in July, but are still having trouble selling the newly constructed homes.
Census Bureau data showed builders would construct 1.43 million if they sustained their pace for a year. It was better than economists projected, but still not enough to meet demand. More than 2 million new homes need to be built each year to close a housing gap that is driving up housing costs across the country.
Construction is unlikely to catch up soon, the report also indicated. The annual pace of building permits in July slowed to 1.35 million. Builders are reluctant to boost their production while mortgage rates and construction costs are high, wrote Heather Long, chief economist at Navy Federal Credit Union.
“U.S. home construction is in a funk,” wrote Heather Long, chief economist at Navy Federal Credit Union. “The nation desperately needs more homes that are affordable, but home construction is depressed and is only likely to get worse in the months to come.”
Despite dropping recently, mortgage rates remain elevated. Meanwhile, the cost of buying a home continues to rise, with the median home price increasing by 1.4% in the year ending in July, according to Redfin.
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