Two key forces are driving single-family housing, but are they enough?

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Two economic factors are the main forces driving single-family housing forward, but their potential is limited.

Reduced mortgage rates and job growth are welcome conditions that'll be largely responsible for any near-term single-family construction growth, according to the National Association of Home Builders.

The 224,000 jobs added to the country's workforce in June helped hold the unemployment rate at a low of 3.7% for the month. At the same time, the 30-year note rate averaged near 3.8%, according to Freddie Mac data.

But both economic variables have their constraints.

While job creation is a positive for consumer affordability and a way to spur market movement as consumers make career moves, low unemployment is "further aggravating the scarcity of skilled laborers," according to an NAHB analysis. This means less workers are available to support the creation of new homes, as about 369,000 jobs went unfilled in the construction sector in May.

And though lower rates help spur more homebuyer demand, results have been restricted; pending home sales did tick up 1.1% between April and May, but they were still down annually, as they have been for 17 consecutive months, according to the National Association of Realtors. An increase in the demand for housing can subsequently put upward pressure on home prices as buyers battle over a limited supply of affordable houses.

Construction in the single-family sector is down 5% so far in 2019 versus the first half of 2018, with the South being the only region to post a net gain this year. Results for single-family permits are similar: After hitting a high of 103,000 in December, housing permit volume has since fallen to 85,000.

Still, homebuilders remain optimistic about the market. Builder confidence increased one point to 65 in July, according to the NAHB/Wells Fargo Housing Market Index, where a figure above 50 suggests more builders view conditions as good than poor. Builders reported solid demand for single-family housing, but still cited a number of impediments — labor shortages, a lack of buildable lots and increasing construction costs — challenging their ability to create more homes at affordable price points.

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Homebuilders Economy Mortgage rates Purchase First time home buyers NAHB Wells Fargo NAR
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