WASHINGTON: Homebuilding in the United States slowed in July, in large part due to a drop in construction of apartment buildings, the government reported Wednesday.
The slowdown erased most of the gains recorded in a spike in June, and the pace of homebuilding has now decreased in four of the past five months, according to the Commerce Department.
The decrease was likely to revive concerns among industry players and analysts that sluggish construction is failing to keep pace with demand amid a continuing economic recovery, driving prices higher.
Total housing starts fell 4.8 percent for the month to a seasonally adjusted annual rate of 1.155 million, the Commerce Department said. Analysts had instead been expecting a 0.3 percent increase.
The July pace was 5.6 percent below the rate recorded in the same month of last year. Construction permits, an indicator of future homebuilding, also fell 4.1 percent for the month.
The figures released Wednesday confirmed a sharp downward trend in construction of buildings with five or more units. They fell 17.1 percent for the month to an annual rate of 287,000 units but were 35 percent below the pace recorded in July of 2016.
Permits for multi-unit dwellings also fell 12.1 percent.
The slowing apartment building could suggest homebuilders are turning away from serving what has been a hot rental market. Still, construction of new single-family homes also slowed by 0.5 percent.
Analysts say the recovering economy has produced a very tight market, with a surge of demand following the Great Recession met by slow construction of new homes while many current homeowners are reluctant to sell.
Lawrence Yun, chief economist for the National Association of Realtors, said a housing shortage in the United States was likely to intensify.
“Because of this continued shortage, expect rents and home prices to rise by at least twice as fast as the broad consumer price index,” he said in a statement.
Ian Shepherdson of Pantheon Macroeconomics said that, despite an apparent shift toward single-family home building, the prospects were weak for a recovery.
“The trend in single-family construction, which accounts for about three-quarter of all activity, flattened off late last year and is still headed sideways,” he said in a research note.
“Housing, it’s safe to say, is not going to be much of a driver of overall economic growth anytime soon.”