On Friday, the Census Bureau reported single-family starts fell 2.2% in July and the construction of new homes has been hovering around a 600,000 seasonally adjusted annual rate since April.
In addition, housing permits were down in three of the four regions, according to an IHS Global Insight commentary on government’s housing starts report. “The numbers show a loss of momentum,” Global Insight economists Patrick Newport and Stephanie Karol said in their Aug. 16 commentary.
They also noted that extremely rainy weather “likely played a role in suppressing starts in June and July.”
Analysts at Zacks Equity Research also noted a slowdown in momentum in their latest assessment of the news and events impacting the stocks of major homebuilders.
“The housing momentum in 2012 and in the first half of 2013 seems to have slowed somewhat with the recent spike in interest rates, tight credit availability and limited supply of land and labor,” Zacks said in a press release.
Sales of new homes jumped 8% in June on top of smaller gains in the previous two months, according to economists at JPMorgan Chase Bank. But they expect a Census Bureau report this Friday will show a 2.4% decline in July sales.
“With interest rates increasing over the past few months and mortgage purchase application volumes declining recently, we look for some payback from the strong June increase with a decline in sales in July,” the JPMorgan economists said in their US Weekly Prospects report.
Meanwhile, major builders have been slowing sales to take advantage of rising prices and the strong demand for new homes. They have this market power due to the problems smaller local builders face in lining up construction financing and building lots.
“Builders are undersupplying the market, so inventories are likely to get leaner in the months ahead, and price growth is likely to accelerate. This will bring more builders into the market,” the Global Insight economists said.