The Commerce Department reports that single-family home starts showed a one-month drop of 2.2% in July to reach an annual rate of 591,000 units, the lowest level of housing starts since last November.
While single-family starts were off, the National Association of Home Builders (NAHB) noted a 26% gain in multifamily projects. NAHB attributed the decline in single-family construction to “unusually wet weather in the South and West.”
The Wall Street Journal says that rising mortgage rates might be behind the decline. The average rate for a 30-year mortgage has risen by almost 1 point since April to 4.4%. Higher rates not only make potential buyers nervous but also prompt builders to reconsider projects that might sit unsold on the market, the newspaper says.
The Journal quotes analysts at IHS Global Insight as saying that it’s too soon to be concerned about the dip in single-family housing starts because sales are strong. “Builders are undersupplying the market, so inventories are likely to get leaner in the months ahead, and price growth is likely to accelerate,” the analysts said.
At the same time, the NAHB/Wells Fargo Housing Market Index, a measure of builder confidence in the market, rose by 3 points in August to 59, the highest level in nearly eight years. “Builders are seeing more motivated buyers walk through their doors than they have in quite some time,” NAHB chairman Rick Judson said in a news release.
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